USD/CAD Price Forecast: Are moving averages next after the rise above 1.4050?

• Downside risks could take USD/CAD towards 1.3950, near the falling wedge’s lower boundary.
• Bearish momentum persists, with the 14-day Relative Strength Index hovering near 45.
• Immediate resistance is being tested where the 50- and nine-day EMAs converge at 1.4066 and 1.4067, respectively.

A third successive day of gains takes USD/CAD to around 1.4060 in Wednesday’s European session. Later in the day, the Bank of Canada (BoC) is expected to raise interest rates by 25 basis points.

On the daily chart, price action remains confined to a falling wedge. This technical pattern points to the possibility of a bullish breakout as selling momentum fades.

The near-term outlook for USD/CAD remains bearish, with spot trading just below a closely grouped set of Exponential Moving Averages (EMAs). Immediate resistance comes from the 50-day EMA near 1.4066 and the nine-day EMA around 1.4068.

After failing to hold its recent highs, USD/CAD has moved below these trend indicators. A 14-day Relative Strength Index (RSI) reading around 45 points to continuing bearish momentum, rather than clearly oversold conditions.

A decline towards the falling wedge’s lower boundary, around 1.3950, remains possible for USD/CAD. Should the pair break below the wedge, selling pressure could take it towards the five-month low of 1.3732 recorded on 21 May. Beyond that, support is located at 1.3481, the lowest level since October 2024.

At the upper boundary of the falling wedge, USD/CAD is testing a confluence of immediate resistance formed by the 50- and nine-day EMAs at 1.4066 and 1.4067, respectively. A move above this resistance zone would create scope for gains towards 1.4299, the nearly 18-month high reached on 14 October.

Could the Fed pause now and still hike in December?

A pause at this week’s Fed meeting remains the expectation of strategists at ABN Amro, although they flag “some risk of hawkish dissents” as policymakers leave rates unchanged. While acknowledging that “inflation remains too hot,” they contend that “declining breadth and a cooler labour market give the Fed room to wait.” On the change in market expectations, they observe that markets have “sharply reduced the probability of an October hike, and December is no longer fully priced.” Even so, ABN Amro continues to expect “one final 25bp hike in December, followed by an extended hold.”

Could the BoC decision deliver a surprise?

Markets still face uncertainty over today’s BoC decision, according to analysts at MUFG/BTMU. They point out that current pricing implies “an 80% probability of a rate hike,” which they say “is not quite in done-deal territory and there is scope for a surprise.” Although investors favour another move by the BoC, the analysts suggest that enough uncertainty remains for the meeting to be a live event for markets.

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