USD/CAD Price Forecast: Trades near 1.3950 after pulling back from falling wedge top

• USD/CAD may find initial support at the falling wedge bottom around 1.3900.
• The 14-day Relative Strength Index is at 37, suggesting fading downside momentum.
• The immediate barrier lies at the falling wedge top around 1.3990.

USD/CAD loses ground after registering modest gains the previous day, trading around 1.3970 during European hours on Tuesday. The technical analysis of the daily chart shows that the pair price is close to the upper resistance line of a falling wedge pattern, signaling that the market is reaching a critical inflection point where a bullish breakout may be imminent. However, the pair pulled back from the wedge top, showing that sellers are still defending the upper boundary.

The USD/CAD pair is keeping a bearish near-term bias as it holds below both the nine- and 50-period Exponential Moving Averages (EMAs). The pair has retreated from recent highs and now trades under these short- and medium-term trend benchmarks, while the 14-day Relative Strength Index (RSI) at 37 suggests fading downside momentum but still leans toward weak pressure rather than a sustained recovery.

On the downside, the USD/CAD pair may fall toward initial support at the lower boundary of the falling wedge around 1.3900. A break below the wedge could put downward pressure on the pair to navigate the region around the five-month low of 1.3732, recorded on May 21, followed by 1.3481, the lowest since October 2024.

The USD/CAD pair may rebound and test the immediate barrier at the upper boundary of the falling wedge around 1.3990, followed by the nine- and 50-day EMAs at 1.4010 and 1.4051, respectively. A successful break above this confluence resistance zone would cause the bullish reversal and support the pair to approach a nearly 18-month high of 1.4299, recorded on October 14.

BoC hike seen as pre-emptive as Macklem’s tone skews hawkish

Analysts at Standard Chartered note that the Bank of Canada (BoC) “raised the policy rate by 25bps to 2.5% at its 28 October meeting; we had expected a pause.” They highlight that, while “consensus leaned towards a hike,” many observers had judged “such a move unnecessary amid subdued core inflation and soft growth.” In their view, the decision underlines the BoC’s “strong preference to hike pre-emptively in response to inflation risks.”

Scotiabank points to subsequent remarks from Governor Tiff Macklem as reinforcing that message. According to the bank, “comments from BoC Gov. Macklem reported by Bloomberg late Wednesday offered a relatively hawkish read, relative to a statement and press conference that had been somewhat more restrained,” suggesting the governor’s tone may have tilted market perceptions of the policy move further in a hawkish direction.

(The technical analysis of this story was written with the help of an AI tool. Know more.)