USD/CAD Price Forecast: Tests rising wedge bottom around 1.4250
- USD/CAD could find initial support at the lower boundary of the rising wedge around 1.4250.
- The 14-day Relative Strength Index is at 67.2, hinting at maturing upside momentum.
- The immediate barrier lies at the 19-month high of 1.4299.
USD/CAD remains stronger for the fourth successive day, trading around 1.4260 during Asian hours on Friday. The technical analysis of a daily chart shows the pair is remaining within the rising wedge pattern that signals a bearish price breakdown and a potential shift to the downside.
The USD/CAD pair is retaining a bullish near-term bias as it holds above both the nine-day and 50-day Exponential Moving Averages (EMAs). The clustering of short- and medium-term EMAs beneath price suggests underlying demand, while the 14-day Relative Strength Index (RSI) at 67.2 hovers just below overbought territory, hinting at still firm but maturing upside momentum.
On the downside, the USD/CAD pair tests the initial support at the lower boundary of the rising wedge around 1.4250, followed by the nine-day EMA of 1.4165 and the 50-day EMA of 1.4081. A break below the moving averages would put downward pressure on the pair to navigate the region around the five-month low of 1.3732, recorded on May 21.
The USD/CAD pair may test the immediate barrier at the 19-month high of 1.4299, recorded on October 14, followed by the upper boundary of the rising wedge around 1.4330.
BoC caution keeps US policy convergence a 2025 story
Analysts at NBC highlight that “relatively contained underlying inflation should allow the BoC to proceed cautiously despite lingering energy-cost pressures,” reinforcing the view that any “sustained narrowing of the policy gap with the United States” will remain “largely a story for next year.” This measured stance aligns with expectations that meaningful convergence in BoC–Fed policy settings is more likely to emerge in 2025 rather than over the remainder of this year.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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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