USD/CAD Price Forecast: Flirts with 1.3730-1.3725 support ahead of US/Canadian macro data
- USD/CAD drifts lower for the second straight day amid sustained USD selling.
- The technical setup favors bearish traders and backs the case for further losses.
- Any recovery attempt is more likely to attract fresh sellers and remain limited.
The USD/CAD pair extends the previous day's rejection slide from the 1.3800 mark and attracts some follow-through selling for the second consecutive day on Tuesday. Spot prices remain depressed through the early European session and currently trade just above the 1.3730 area, or the lowest level since September 17, touched last week.
The said area also represents an ascending trend-line support extending from the 1.3540 area, or the year-to-date low set in July, which, if broken, will be seen as a key trigger for bearish traders. This will set the stage for an extension of the USD/CAD pair's downfall from the vicinity of mid-1.4100s, or November swing highs, which constituted the formation of a double-top pattern on the daily chart.
Meanwhile, the USD/CAD pair remains beneath the 200-day Exponential Moving Average (EMA), currently pegged near the 1.3900 mark, preserving a bearish bias. The average is starting to edge lower and should cap any meaningful recovery attempts. Moreover, the Moving Average Convergence Divergence (MACD) holds below the Signal line and under the zero mark, while the negative histogram contracts, suggesting fading downside momentum.
The Relative Strength Index at 31 is near oversold and could slow the slide. Hence, it will be prudent to wait for a convincing break below the aforementioned trend-line support before placing fresh bearish bets around the USD/CAD pair and positioning for further losses. Traders now look to the monthly Canadian GDP, which, along with the prelim US Q3 GDP and Durable Goods Orders, might provide some impetus later during the North American session.
As long as spot prices are contained below the long-term average, rallies would stay corrective, and bears would retain the upper hand. A bullish crossover in MACD and a sustained move above zero would hint at an upside transition, while RSI edging back toward 40–50 would reflect stabilizing momentum. A daily close below the rising trend line would reassert the decline, whereas a recovery above the mean would open room for a broader rebound.
(The technical analysis of this story was written with the help of an AI tool)
USD/CAD daily chart
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
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