The USDCAD is experiencing pressure as traders failed to maintain a breakout above the 1.3759 ceiling in previous trading sessions. Yesterday’s peak reached 1.3773 but retraced, reversing towards lower levels after not sustaining the breakout.
Earlier, support was found near 1.3667, which previously acted as a strong level due to earlier week’s lows. The recent recovery hit a barrier at the 200-hour moving average, with buyers holding until the breakout attempt failed.
Potential Price Shifts
Currently, the focus is on the 200-hour moving average near 1.3699, a pivotal marker for potential price shifts. Falling below this, especially the 38.2% retracement at 1.3682, could indicate a further bearish trend towards 1.3664–1.3669.
To maintain a neutral-to-positive stance, buyers need to recover ground, targeting the 1.3711–1.3715 zone. This includes moving past the 100-hour moving average at 1.37153, potentially moving above to target levels around 1.3730.
Key support levels include the 200-hour moving average at 1.3699, with nearby retracements at 1.3682 and weekly lows at 1.3664–1.3669. Resistance is noted from 1.3711–1.3715, the 100-hour moving average, and reaching upwards to 1.3773.
With buyers failing at the 1.3759 ceiling, we see an opportunity for short-term bearish plays. The immediate focus is on the 200-hour moving average around 1.3699, which is the line in the sand for now. Should this level break, we would consider buying put options or establishing bear put spreads to target the 1.3664 support zone.
Supporting Data
This bearish view is supported by recent fundamental data that weakens the US dollar side of the pair. The latest US Consumer Price Index reading for June came in at 3.0% year-over-year, continuing a cooling trend that reduces pressure on the Federal Reserve to maintain its hawkish stance. This macro headwind aligns with the technical failure noted in the price action.
On the other side of the pair, strengthening Canadian factors also suggest a move lower. Canada’s most recent jobs report for June showed a gain of over 27,000 positions, beating forecasts and signaling economic resilience. Furthermore, with WTI crude oil prices climbing back above $80 a barrel, the commodity-linked Canadian dollar receives a natural boost.
However, we must respect the powerful underlying divergence in central bank policy. The Bank of Canada already initiated an interest rate cut in June, while the Federal Reserve is holding steady, creating a rate differential that fundamentally supports a higher USDCAD over the long term. This historical driver suggests that any dip toward the 1.3664–1.3669 support area could be met with significant buying pressure.
Given these conflicting signals—short-term bearish data versus long-term bullish policy—we anticipate increased volatility. A derivatives strategy like a long strangle, which involves buying both an out-of-the-money call and put option, could be effective to profit from a significant price swing in either direction. This approach allows us to capitalize on a breakout without betting on the specific direction in this uncertain environment.
