USD/CAD reversed off six-month highs as bulls relent ahead of tomorrow’s key Fed and BoC rate decisions. Battle lines drawn on the USD/CAD weekly technical chart.
By : Michael Boutros, Sr. Technical Strategist
Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels
- USD/CAD pulls back from six-month highs, marking a second weekly decline after reversing off key uptrend resistance.
- The broader focus is on a possible test of trend support in the days ahead as traders position into dual central bank decisions
- Resistance 1.3978/1.4019(key), 1.4184, 1.4292-1.4315– Support 1.38734/81 (key), 1.3734/46, 1.3583
The Canadian Dollar is on the offensive for a second straight week, with USD/CAD reversing off six-month highs ahead of major event risk. The pair has retreated from uptrend resistance and focus now shifts to whether this pullback marks the start of a larger correction or merely a pause within the broader advance. Traders are bracing for volatility as both the Federal Reserve and Bank of Canada deliver rate decisions tomorrow—events that could drive price action into the weekly and monthly close. Battlelines drawn on the USD/CAD weekly technical chart.
Canadian Dollar Price Chart – USD/CAD Weekly
Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CAD on TradingView
Technical Outlook: In my last Canadian Dollar Technical Forecast we noted that USD/CAD was, “testing a critical resistance zone into the start of the month, and the focus is on possible inflection off this zone with the long-bias vulnerable while below… From a trading standpoint, losses would need to be limited to 1.3819 IF price is heading for a breakout on this stretch with a weekly close above 1.4019 needed to fuel the next major leg of the advance.” Despite numerous attempts to breach this key resistance zone, the bulls have been unable to mark a weekly close above with USD/CAD now off more than 1% from the October high.
Weekly support rests at 1.3874/81- a region defined by the 38.2% retracement of the June advance and the 2022 high-week close. Note that basic channel support converges on this threshold over the next few weeks and a break / close below this slope is needed to suggest a more significant high is in place / a larger reversal is underway. Subsequent support objectives rest at the 2025 low-week close (LWC) / 61.8% retracement at 1.3734/46 and the yearly close low at 1.3583- both levels of interest for possible downside exhaustion / price inflection IF reached.
Critical resistance remains unchanged at 1.3978-1.4019- a region defined by the 2022 swing high, the 52-week moving average, and the 38.2% retracement of the yearly range. Note that the 2022 trendline also converges on this threshold and a breach / weekly close above is needed put the bulls back in control and mark resumption of the June uptrend. Subsequent resistance objectives are eyed at the February close low at 1.4183 with the next major technical consideration eyed at the 2025 high-week close (HWC) / 61.8% retracement at 1.4292-1.4315- look for a larger reaction there IF reached.
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Bottom line: The USD/CAD rally has stalled at key resistance for the past four-weeks with the bulls relenting ahead of major event risk over the next 24 hours. From a trading standpoint, the near-term risk is tilted to the downside, but losses should be limited to 1.3874 IF price is heading higher on this stretch with a weekly close above 1.4019 needed to fuel the next leg of the advance.
The highly anticipated Bank of Canada and Federal Reserve rate decisions are on tap tomorrow, with both central banks widely expected to deliver 25bps cuts. Traders will focus on forward guidance from the Fed, particularly regarding expectations for the December policy meeting and any signal on the future of quantitative tightening (QT). Markets currently assign an 88% probability of another rate cut before year-end. Stay nimble into the release & subsequent presser with Powell and watch the weekly / monthly close for guidance on the next directional move. Review my latest Canadian Dollar Short-term Outlook for a closer look at the near-term USD/CAD technical trade levels.
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— Written by Michael Boutros, Sr Technical Strategist
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