The USDCAD has been climbing, reaching a swing area between 1.3891 and 1.3904. Surpassing this zone could lead to the 38.2% retracement of the March 4 decline at 1.39229. This level is vital for buyers aiming to regain control after a period of decrease.
Recent movements have been positive, as the pair surpassed the 100- and 200-bar moving averages on the 4-hour chart, at 1.37966 and 1.3742 respectively, and the 100-day moving average of 1.3769. Additionally, on Tuesday, it broke past a previous swing zone of 1.3812 to 1.38215, showing upward momentum.
Hourly Chart Movements
On the hourly chart, Monday saw a brief dip below the 100-hour moving average of 1.3838, but the price rebounded quickly, boosting buyer confidence. The rally then advanced beyond the August 1 high of 1.38785, continuing its upward trend today.
For those trading intraday, close risk is at 1.3875, the August 1 high, while more conservative risk is by the rising 100-hour moving average at 1.3838. As long as these support levels remain intact, the momentum remains in favour of further upward movements.
We are seeing strong upward momentum in the USDCAD as it pushes into a key resistance zone between 1.3891 and 1.3904. Buyers have been in control, pushing the price above several important moving averages. A break above this area would confirm that the current bullish sentiment has room to run.
Economic Factors and Market Dynamics
This technical strength is underpinned by diverging economic data. The latest US Core PCE data for July came in at 3.1%, slightly above forecast, reinforcing the view that the Federal Reserve will hold interest rates steady through the end of the year. This contrasts sharply with Canada, where the most recent jobs report showed a surprise loss of 15,000 jobs, raising concerns about economic slowing.
Adding to the pressure on the Canadian dollar, WTI crude oil prices have recently slipped below $75 a barrel amid renewed global demand concerns. This fundamental backdrop supports a stronger US dollar relative to the Canadian dollar. The current market dynamic reminds us of the setup in late 2022, when Fed hawkishness drove significant dollar strength across the board.
For derivative traders, this suggests positioning for further upside, possibly through buying call options with strike prices above 1.3900. Intraday risk can be managed against the 1.3875 level, while those holding longer-term futures positions should watch the 100-hour moving average around 1.3838 as a key support level. Momentum remains with the buyers as long as these levels hold.
The most critical level to watch is the 1.39229 price point, which marks the 38.2% retracement of the decline from the March 4, 2025 high. A sustained move above this level would be the minimum confirmation we need to see to believe that the downtrend from earlier this year is truly reversing. Until then, the buyers have the advantage but have not yet won the larger battle.
