USD/CAD Price Forecast: Pair trades within falling wedge near 1.4000

• The falling wedge’s lower boundary near 1.3940 may be the next downside target for USD/CAD.
• A decline towards 39 in the 14-day Relative Strength Index suggests bearish momentum remains dominant.
• At 1.4042, the nine-day EMA provides the first significant hurdle.

At around 1.3990 in Thursday’s European session, USD/CAD is under pressure for a second consecutive day. On the daily chart, the exchange rate remains inside a falling wedge. This pattern indicates that selling momentum is fading and points to the possibility of a bullish breakout.

Trading below both the nine- and 50-period Exponential Moving Averages (EMAs), USD/CAD retains a bearish short-term bias. Following a pullback from recent highs, the 14-day Relative Strength Index (RSI) has eased to roughly 39, indicating continued bearish momentum rather than outright oversold conditions. Meanwhile, a reading of around 142 on the FXS Fed Sentiment Index points to a softer policy backdrop, which is offering the exchange rate no support at this stage.

Initial support for USD/CAD could emerge near 1.3940, where the falling wedge’s lower boundary sits. Should the pair break below the pattern, further selling pressure could take it towards the five-month low of 1.3732 reached on 21 May. Beyond that, 1.3481, the lowest level since October 2024, offers additional support.

A recovery in USD/CAD could bring the main resistance confluence into focus, starting with the nine-day EMA around 1.4042. The next obstacles are the 50-day EMA at 1.4060 and the falling wedge’s upper boundary near 1.4080. Clearing this confluence would leave scope for a move towards 1.4299, the high of nearly 18 months recorded on 14 October.

BoC Rate Rise Signals Cautious Tightening Phase

The Bank of Canada’s latest decision largely matched expectations, according to analysts at ING, who note that the BoC had “raised rates by 25bp to 2.50% yesterday, in line with market expectations.” In their view, “stronger activity and growing concerns about cost pass-through suggest this is unlikely to be a one-and-done move,” although policymakers stressed that they “will proceed carefully,” signalling a measured approach to further tightening.

(The technical analysis of this story was written with the help of an AI tool. Know more.)