USD/CAD Price Forecast: Can support hold as pair tests rising wedge bottom near 1.4250?

Initial downside support for USD/CAD could emerge near 1.4250, where the rising wedge’s lower boundary lies.
Upside momentum appears to be maturing, with the 14-day Relative Strength Index reading 67.2.
At 1.4299, the 19-month high marks the nearest resistance.

Bullish sentiment continues to support USD/CAD, which is advancing for a fourth consecutive day and trading near 1.4260 in Friday’s Asian session. On the daily chart, however, the pair remains inside a rising wedge, a pattern signalling a bearish price breakdown and a possible turn lower.

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

Trading above both the nine-day and 50-day Exponential Moving Averages (EMAs) keeps the near-term outlook for USD/CAD bullish. Underlying demand is suggested by the grouping of the short- and medium-term EMAs below the price. Meanwhile, the 14-day Relative Strength Index (RSI) stands at 67.2, just short of overbought territory, indicating that upward momentum remains firm but is maturing.

The first support being tested by USD/CAD is near 1.4250 at the rising wedge’s lower boundary. Below this lie the nine-day EMA at 1.4165 and the 50-day EMA at 1.4081. Were the pair to slip beneath these moving averages, downward pressure would leave it heading towards the area around 1.3732, the five-month low registered on 21 May.

A possible upside test for USD/CAD is the nearest resistance at 1.4299, the 19-month high reached on 14 October. Beyond that, the rising wedge’s upper boundary lies around 1.4330.

Chart Analysis USD/CAD — USD/CAD: What Does The Daily Chart Indicate?

Does BoC caution leave US policy convergence for 2025?

Meaningful convergence between BoC and Fed policy settings is expected to be more likely in 2025 than during the rest of this year, consistent with the BoC’s measured approach. NBC analysts point out that “relatively contained underlying inflation should allow the BoC to proceed cautiously despite lingering energy-cost pressures,” supporting the assessment that any “sustained narrowing of the policy gap with the United States” will remain “largely a story for next year.”

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

Canadian Dollar: Frequently Asked Questions

Which factors shape movements in the Canadian Dollar?

The Canadian Dollar (CAD) responds to several major influences: interest rates set by the Bank of Canada (BoC), Oil prices, the strength of Canada’s economy, inflation and the trade balance. Oil is the country’s largest export, while the trade balance measures the difference between the value of its exports and imports. Investor sentiment also matters. A willingness to buy riskier assets, known as risk-on sentiment, supports CAD, whereas a preference for safe havens reflects risk-off sentiment. Economic conditions in the US are another important influence on the Canadian Dollar, as the US is Canada’s largest trading partner.

Why do Bank of Canada decisions matter for the Canadian Dollar?

By determining the interest rates at which banks lend to each other, the Bank of Canada (BoC) exerts considerable influence over the Canadian Dollar. Those rates, in turn, affect borrowing costs across the economy. Keeping inflation within 1-3% is the BoC’s primary objective, pursued by raising or lowering interest rates. Relatively elevated rates generally support CAD. The central bank can also shape credit conditions through quantitative easing, which is negative for CAD, or quantitative tightening, which is positive for the currency.

Why is the Canadian Dollar sensitive to Oil prices?

Canada’s largest export is petroleum, making Oil prices a major influence on the Canadian Dollar and often giving price changes an immediate effect on its value. As Oil becomes more expensive, overall demand for CAD generally increases and the currency tends to strengthen. Falling Oil prices usually have the reverse effect. A rise in Oil prices also increases the likelihood of a positive trade balance, providing further support for CAD.

Why can inflation figures move the Canadian Dollar?

Traditionally, inflation was regarded as harmful to a currency because it erodes the value of money. In modern times, however, the easing of cross-border capital controls has meant the reverse has been true. When inflation rises, central banks tend to increase interest rates, drawing in more capital from international investors seeking attractive returns on their money. The resulting demand supports the domestic currency, which in Canada is the Canadian Dollar.

Why does economic data matter for the Canadian Dollar?

The Canadian Dollar can react to macroeconomic releases because they provide a measure of the economy’s health. GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys are among the indicators that can determine CAD’s direction. Economic strength supports the currency by attracting foreign investment and potentially prompting the Bank of Canada to raise interest rates, which strengthens it further. Conversely, weak economic readings are likely to weigh on CAD.