The USD/CAD currency pair continues to exhibit a bearish trajectory, extending its downward correction and slipping to around 1.3660 during Thursday’s Asian trading session. This decline marks a significant retracement from earlier gains, with the pair now hovering close to the eight-month low of 1.3634, recorded on June 5.
The current market structure indicates increasing bearish pressure, with the pair trading firmly within a descending channel pattern. Explore how Aurudium dissects this topic, offering valuable takeaways and expert commentary.
Technical Overview: Persistent Bearish Momentum
The pair’s downward move is reinforced by key technical indicators. The 14-day Relative Strength Index (RSI) currently remains slightly above the 30 threshold, a critical zone that defines the difference between a continuation of bearish momentum and an oversold market condition.
The RSI’s position above 30 suggests that the pair still has room for further downside without entering technically oversold territory, sustaining the bearish bias for the short term.
Additionally, the USD/CAD pair remains below the nine-day Exponential Moving Average (EMA), which now stands at 1.3695. This alignment below a key short-term resistance level adds weight to the downside pressure, indicating that any attempt to recover may face significant selling interest at or below the 1.3695 region.
Support Levels: Focus on 1.3634 and Below
The immediate and most notable support level lies at 1.3634, representing the lowest level since October 2023. This eight-month low serves as a pivotal zone for determining near-term price direction.
A sustained break and close below this level would likely invite further selling pressure and could lead the pair toward deeper support levels near the lower boundary of the descending channel, around 1.3450.
Beyond this, the next technical support is found at 1.3419, a price level not visited since February 2024. A drop to this region would further solidify the prevailing bearish structure, suggesting a more prolonged correction for the Greenback against the Loonie.
Resistance Zones: EMA and Channel Ceiling in Focus
On the upside, the nine-day EMA at 1.3695 represents the first significant resistance barrier. If USD/CAD can stage a sustained move above this level, it may challenge the upper boundary of the descending channel, which currently lies near 1.3720.
These two technical levels form a resistance cluster, and overcoming this zone could signal a shift in market sentiment or at least a corrective rebound.
A decisive breakout above 1.3720 would open the path toward the 50-day EMA, which is presently located at 1.3874. If bullish momentum persists, market participants may then look to the two-month high of 1.4016, achieved on May 13, as a medium-term target.
However, in the current landscape, such a scenario would require a clear invalidation of the ongoing descending trendline resistance.
Market Context: USD Weakness and Canadian Dollar Strength
From a macroeconomic perspective, the weakness in USD/CAD can be partially attributed to a weaker US dollar, amid shifting Federal Reserve expectations and recent softer US economic data. Meanwhile, the Canadian dollar has remained relatively resilient, supported by firmer oil prices, a key driver for the commodity-linked Loonie.
Additionally, interest rate differentials and market sentiment around central bank policy are influencing pair flows. The Bank of Canada (BoC) has maintained a relatively neutral tone in recent communications, while Fed officials are increasingly cautious, with a dovish tilt creeping into expectations for future rate cuts. This policy divergence continues to weigh on USD/CAD.
Short-Term Outlook: Risk Skewed to the Downside
Technically, as long as the pair continues to trade below the nine-day EMA and within the descending channel, the outlook remains skewed to the downside. Traders should monitor a potential break below 1.3634, which would confirm further bearish continuation.
The RSI, still above oversold conditions, provides scope for additional declines before any significant reversal signals emerge.
However, should the RSI dip below 30, this could trigger profit-taking or short-covering rallies, especially if prices approach oversold support levels such as 1.3450. In such a case, intraday rebounds toward 1.3695–1.3720 may be short-lived unless confirmed by volume and momentum indicators.
Conclusion: Caution Advised Amid Fragile Price Action
The USD/CAD pair remains under pressure as the technical landscape continues to favor sellers. With the pair nearing eight-month lows and broader macro headwinds supporting CAD strength, downside risks remain prevalent. Key levels to watch include the support at 1.3634 and the resistance at 1.3695.
