The USDCAD pair has repeatedly tested a key support swing area between 1.3813 and 1.3832, with buyers emerging each time to push the pair higher. Currently, the price has slipped back into this zone, with the low at 1.3823, which is mid-way through the support band.
Key Moving Averages
Below this area, crucial moving averages are located, including the 100-bar MA on the 4-hour chart at 1.3804 and the 100-day MA at 1.3768. Sellers would need to break below this broader support region to gain momentum. Meanwhile, buyers need to defend this zone to maintain upward momentum.
On the other side, if the pair holds in this support area, attention shifts to the 38.2% retracement of the March-to-July decline at 1.3923. Last week, the pair did not break through this level, which was tested before Fed Chair Powell’s speech. This failure means the retracement level acts as a ceiling, favouring a downward bias for now.
With the moving averages converging below, the area for potential shifts between buyers and sellers is evident. The responsibility remains on buyers to uphold support to shift the momentum to their favour.
We are seeing the USDCAD pair move back into a critical support area between 1.3813 and 1.3832, a level that buyers have defended twice already. A significant cluster of moving averages sits just below 1.3804, making this zone a major battleground. The pressure is mounting on buyers to hold this line to prevent a deeper slide.
Market Dynamics and Influences
This technical test is happening as recent US inflation data for July 2025 came in slightly hot at 2.9%, reinforcing the Federal Reserve’s data-dependent but firm stance. In contrast, the Bank of Canada has expressed more concern over a domestic economic slowdown, creating a policy divergence that currently favors the US dollar. This fundamental pressure makes holding the 1.3800 support level even more critical for the Canadian dollar.
Adding to this, we have seen weakness in the energy markets, with WTI crude oil pulling back to near $78 a barrel after recent inventory reports showed an unexpected build. This drop in oil prices weighs directly on the commodity-linked Canadian dollar, providing another reason for USDCAD to find support here. We saw a similar dynamic in late 2023 when falling oil prices helped push the pair significantly higher.
For derivative traders, a successful defense of the current support zone could present an opportunity to position for another test of the 1.3923 resistance. This ceiling, which marks the 38.2% retracement level, proved strong last week. Buying near-term call options could be a way to capitalize on a bounce from the current support.
Conversely, a decisive break below the moving average cluster around 1.3768 would be a strong bearish signal, suggesting sellers are finally taking control. Such a move would likely trigger stop-loss orders and open the door to a faster decline. In that scenario, traders might consider buying put options to profit from a potential slide toward the lows we saw earlier this summer.
