The USD/CAD currency pair continues to trade with a negative bias, remaining within a confined range below the critical 1.4000 level and the 200-day Simple Moving Average (SMA). As of Friday, the pair is hovering just beneath the mid-1.3900s, marking a daily decline of over 0.10%, driven by a confluence of macroeconomic and commodity-linked pressures.
While the pair’s broader structure suggests a bullish consolidation, the technical and fundamental landscape signals caution for traders anticipating a breakout in either direction. An expert-level review of this topic is presented by Tandexo brokers in this publication.
Fundamental Drivers: Softer USD, Stronger Crude Oil
A key catalyst influencing USD/CAD price action is the softening US Dollar (USD), which has remained under pressure following the release of weaker-than-expected US macroeconomic data on Thursday. The data reinforced growing expectations for monetary policy easing by the Federal Reserve (Fed) later this year, thereby diminishing USD demand across the board.
Simultaneously, Crude Oil prices have posted a modest recovery, which has provided a supportive tailwind for the Canadian Dollar (CAD), often referred to as the Loonie due to its close correlation with oil. Canada is a major oil exporter, and rising energy prices tend to enhance CAD‘s attractiveness, leading to increased selling pressure on USD/CAD.
Technical Outlook: Mixed Signals and Key Levels
From a technical standpoint, USD/CAD continues to exhibit a range-bound pattern, contained largely between the 1.3900 support and the 1.4000 resistance zone. This consolidation follows a recovery from the year-to-date low near 1.3750, hinting at a potential bullish continuation, provided key resistance levels are breached convincingly.
200-day SMA and 38.2% Fibonacci Resistance
The 1.4000 mark represents a critical confluence zone as it aligns with both the 200-day SMA and the 38.2% Fibonacci retracement of the March–May decline. This area has proven to be a formidable barrier this week, as the pair failed to sustain any upward momentum beyond it.
This repeated rejection suggests a lack of bullish conviction, at least for now, and implies that traders are hesitant to commit to aggressive long positions until a clear breakout materializes.
Technical Indicators: Momentum Still Lacking
Adding to the cautious tone, daily technical indicators remain mixed to neutral, failing to exhibit strong positive momentum. Relative Strength Index (RSI) levels have stayed range-bound, neither oversold nor overbought, while Moving Average Convergence Divergence (MACD) signals have not confirmed a solid bullish bias.
These signals collectively suggest that any near-term bullish scenario would require a firm catalyst—either in the form of stronger US economic data, a dovish shift in Fed rhetoric, or a reversal in Oil prices.
Upside Scenarios: Conditions for a Breakout
Should the USD/CAD pair manage a decisive daily close above the 1.4000 psychological barrier, it could serve as a bullish trigger. This would likely pave the way for a move towards the 1.4050 intermediate resistance, followed by the 1.4100 region, which serves as the next major hurdle.
A successful breach of these levels would not only confirm a trend reversal from the recent downtrend but may also attract fresh bullish interest, supported by momentum buying.
Downside Risks: Support Levels to Watch
On the flip side, immediate downside protection is seen near the 1.3900 round figure, which also forms the lower boundary of the recent trading range. A break below this support could expose the pair to further declines toward the 1.3855 region, followed by the 1.3800 level. If selling pressure persists, the pair may re-test the 2025 year-to-date low near 1.3750, last touched earlier in May.
Importantly, a failure to hold above 1.3900 may signal a bearish resumption, especially if Crude Oil continues to rally and the Fed doubles down on its rate-cut trajectory. In such a case, USD/CAD could begin a new downward leg, potentially revisiting the 1.3700s over the coming weeks.
Conclusion: Wait-and-Watch Mode
Despite a modest downward bias, the USD/CAD pair remains largely range-bound, reflecting market indecision amid conflicting macroeconomic and technical signals. The softer US Dollar and rising Oil prices have tilted the balance slightly in favor of the Canadian Dollar, but the absence of a decisive break below support or above resistance suggests traders should maintain a wait-and-see approach.
Until the pair breaks convincingly out of the 1.3900–1.4000 range, positioning for large moves remains risky. A sustained breakout above the 1.4000 confluence zone could fuel a bullish rally, while a breach below 1.3900 would tilt the short-term outlook bearish, with scope for further declines.
In conclusion, traders should monitor US data releases, Fed commentary, and Oil market dynamics closely, as these will likely serve as key catalysts in determining the next directional move for USD/CAD.
