USDCAD has turned lower this month, breaking beneath two four-hour trendline supports. The first move took the pair below the lower boundary of a bullish channel, and a further drop followed through what is described as base-channel support. The change in structure leaves the pair positioned on the bearish side and points to scope for a higher-degree three-wave decline.
In recent price action, the latest weekly low completed a five-wave move down, a pattern typically aligned with downside continuation. Support is flagged in the 1.3967–1.4000 zone, which could prompt a corrective rebound. Resistance is then seen at 1.4120–1.4160, where an ABC recovery could form before another leg lower, with any rallies treated as corrective while the bearish structure holds.
Breakdown of Key Technical Levels and Bias
We are closely watching the USDCAD currency pair as it has broken below two critical 4-hour support levels, signaling a major shift in market structure. This double breakdown below both the bullish and base channels suggests that sellers are firmly in control and opens the door for a deeper three-wave decline. We advise derivative traders to position themselves for a bearish continuation in the coming weeks rather than trying to buy the current dips.
While the immediate momentum is downward, we expect some temporary buying pressure to emerge near the support zone of 1.3967 to 1.4000. Historically, similar five-wave impulse declines in USDCAD have experienced brief corrective bounces of 80 to 120 pips before the larger downtrend resumed. Recent Canadian economic data, showing a steady inflation rate of around 2.5% alongside stable crude oil exports, supports this potential consolidation phase for the loonie.
Tactical Trade Setups and Risk Management
We should look to use any corrective bounce back toward the 1.4120 to 1.4160 resistance zone to establish new short positions. This area aligns with key Fibonacci retracement levels where sellers have historically stepped back into the market to complete ABC recoveries. Traders using options could consider buying out-of-the-money put options near this resistance level to capitalize on the next projected leg lower.
As long as the price remains below the 1.4160 ceiling, we should view all rallies as corrective selling opportunities rather than the start of a new bullish trend. We recommend keeping stop-losses tight just above this resistance area to manage risk effectively during this volatile shift.
