1.4250 Area: USD/CAD Price Forecast as Pair Tests Rising Wedge Support

1.4250 marks a potential first support area for USD/CAD at the rising wedge’s lower boundary.
At 67.2, the 14-day Relative Strength Index suggests the upward momentum is maturing.
1.4299, the 19-month high, represents the nearest resistance.

1.4260 is the approximate level for USD/CAD in Friday’s Asian session. The pair is extending gains for a fourth consecutive day. On the daily chart, it continues to trade inside a rising wedge, a pattern signalling a bearish breakdown and a possible turn lower.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Trading above both its nine-day and 50-day Exponential Moving Averages (EMAs), USD/CAD maintains a bullish short-term outlook. The short- and medium-term EMAs are clustered below the price, pointing to underlying demand. Meanwhile, the 14-day Relative Strength Index (RSI) stands at 67.2, just short of overbought territory. This suggests upward momentum remains solid but is maturing.

Initial support is being tested near 1.4250, where the rising wedge’s lower boundary lies. Below this, USD/CAD faces the nine-day EMA at 1.4165 and the 50-day EMA at 1.4081. A move beneath these averages would add downward pressure, bringing the area around the five-month low of 1.3732, set on 21 May, into focus.

On the upside, USD/CAD could challenge 1.4299, the 19-month high reached on 14 October. Beyond that immediate resistance, the rising wedge’s upper boundary sits around 1.4330.

Chart Analysis USD/CAD — USD/CAD: Daily Technical Chart

2025 remains the horizon for US policy convergence as BoC stays cautious

A cautious BoC approach supports expectations that meaningful convergence between BoC and Fed policy settings is more likely in 2025 than during the rest of this year. NBC analysts note that “relatively contained underlying inflation should allow the BoC to proceed cautiously despite lingering energy-cost pressures,” supporting their view that any “sustained narrowing of the policy gap with the United States” will remain “largely a story for next year.”

(An AI tool assisted in preparing the technical analysis in this article. Learn more.)

Canadian Dollar: Key Questions

Which factors shape the Canadian Dollar’s performance?

Interest rates set by the Bank of Canada (BoC), oil prices, economic conditions, inflation and the trade balance are the main drivers of the Canadian Dollar (CAD). Oil is Canada’s largest export, while the trade balance measures the difference between the value of its exports and imports. Investor sentiment also matters: a shift towards riskier assets, known as risk-on, supports CAD, whereas risk-off describes a preference for safe havens. Conditions in the US economy are another important influence, as the United States is Canada’s largest trading partner.

Through which channels does Bank of Canada policy affect the Canadian Dollar?

By setting the interest rate at which banks lend to each other, the Bank of Canada (BoC) strongly influences the Canadian Dollar and borrowing rates across the economy. Its primary objective is to keep inflation within 1-3%, using interest rate increases or reductions. Relatively high rates generally support CAD. The Bank of Canada can also adjust credit conditions through quantitative easing or tightening. Easing is negative for CAD, while tightening is positive.

Why do oil prices matter for the Canadian Dollar?

As Canada’s largest export, petroleum gives oil prices a significant and often immediate influence on the Canadian Dollar. Rising oil prices generally lift CAD by increasing overall demand for the currency; falling prices tend to have the reverse effect. More expensive oil also raises the likelihood of a positive trade balance, providing further support for CAD.

Why can inflation figures move the Canadian Dollar?

The relaxation of cross-border capital controls has changed how inflation affects currencies. Traditionally viewed as negative because it erodes the value of money, inflation has in modern times had the opposite effect. Higher inflation typically prompts central banks to raise interest rates. Those higher returns attract capital from global investors seeking a profitable destination for their funds, increasing demand for the domestic currency, which in Canada is the Canadian Dollar.

Which economic releases can affect the Canadian Dollar?

By signalling the economy’s health, macroeconomic releases can move the Canadian Dollar. GDP, manufacturing and services PMIs, employment figures and consumer sentiment surveys can all shape CAD’s direction. Economic strength supports the currency by drawing foreign investment and potentially prompting the Bank of Canada to raise interest rates. Weak economic figures, by contrast, are likely to weigh on CAD.