Over the past 24 to 48 hours, the USD/CAD pair has experienced a noticeable decline, with the latest level hovering around 1.3839, slightly below yesterday’s closing price of 1.38375. The main driver behind this movement was the Bank of Canada’s recent decision to hold its key policy rate steady at 2.25%, aligning with market expectations. This move has placed some pressure on the US dollar against the Canadian dollar, providing temporary support to the latter.

However, market sentiment remains dominated by risk aversion alongside elevated US 10-year Treasury yields, which has lent some support to the US dollar, preventing a sharp slide in USD/CAD. Notably, rising oil prices usually bolster commodity-linked currencies like the Canadian dollar, but the lack of a rate hike from BoC has kept the loonie under pressure in the near term.

For the average investor, this translates into a period of heightened volatility in the USD/CAD exchange rate without a clear directional trend. The BoC’s pause in rate hikes helped stabilize the Canadian dollar temporarily, but the US dollar remains resilient amid ongoing global economic and financial uncertainties. Investors should closely monitor upcoming US jobs data and central bank policy moves, as these will likely dictate the near-term direction.

Overall, the recent market news and price action reflect the Canadian dollar’s sensitivity to BoC’s rate decisions, while the USD maintains strength due to broader macroeconomic factors. For forex traders and investors, understanding this fundamental backdrop is crucial for seizing short-term trading opportunities effectively.

Daily Chart

The daily chart illustrates a medium-term downtrend as USDCAD retraces from recent highs near 1.42 to current levels around 1.38. The 50-day moving average at approximately 1.4 sits above the 200-day average near 1.38, forming a bearish death cross signaling sustained selling pressure. Bollinger Bands are tightening, suggesting diminishing volatility and a potential consolidation phase. The MACD remains in negative territory but shows signs of convergence, hinting at a possible short-term rebound, though resistance remains strong. Overall, the trend remains bearish on the daily timeframe.

1H Chart

The hourly chart over the last 3 to 5 days shows USDCAD struggling with downward momentum, fluctuating within the 1.392 to 1.383 range. Short-term moving averages (20 and 50 MA) have crossed bearish, confirming near-term downside momentum. The lower Bollinger Band provides support and has led to multiple rebounds, yet the price action fails to sustain upward moves. The MACD shows a mild bearish crossover, indicating sellers remain in control. Price action likely will continue its consolidation near support levels until fresh catalysts emerge.

Technical Trend:  Overall trend is cautiously bearish with indications of short-term consolidation and reduced volatility.

Technically, USDCAD is testing crucial support around 1.38. The death cross on the daily MACD and MA indicates established medium-term bearish momentum. The hourly negative momentum intensifies short-term selling pressure, with price forming successive small bearish candlesticks. If the 1.38 support fails, further downside acceleration could ensue. Investors should monitor volume and momentum for signs of potential rebounds. Cautious traders may consider waiting for confirmation before taking new positions or looking for short-term pullbacks to enter long trades.

Today’s economic calendar in GMT+1 includes significant Canadian releases at 14:30 HKT, namely Q2 Labor Productivity and July Trade Balance, both critical to the USDCAD outlook. Stronger-than-expected productivity or smaller trade deficits could boost the Canadian dollar, pressuring USDCAD lower. Conversely, weaker figures would favor the US dollar. Additionally, several US economic data points including Services PMI and ISM Non-Manufacturing Index will be released, potentially impacting USD strength. No other direct or major economic events affecting USDCAD are noted for today, making these releases key focus areas for traders.

Resistance & Support

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