Daily Price Outlook
During the European trading session, the USD/CAD currency pair failed to stop its downward trend and remained well-offered around the 1.3817 level, hitting the intra-day low of 1.3808.
However, the reason for its downward trend could be attributed to the lack of strong momentum from the US Dollar, which has struggled to build significant follow-through buying.
USD Gains but Economic Uncertainty Caps Bullish Sentiment
On the US front, the broad-based US dollar found some support following a two-day losing streak, driven by an upbeat release of the US ISM Services PMI on Monday. This data injected some optimism into the USD, helping the USD/CAD pair edge higher.
However, the ongoing economic uncertainty, particularly stemming from President Donald Trump's unpredictable trade policies, has hindered the USD's ability to gain further traction. These uncertainties are keeping investors cautious, preventing aggressive positioning in the Greenback.
Canadian Dollar Supported by Stabilizing Crude Oil Prices and US-Canada Trade Deal Hopes
On the other side, the Canadian Dollar (CAD) is benefiting from a stabilization in Crude Oil prices, which are attempting to recover from a near one-month low. The price bounce provides support to the commodity-linked Loonie, limiting further gains in the USD/CAD pair.
Furthermore, the hopes of a potential US-Canada trade deal, driven by Trump's comments about Canadian Prime Minister Mark Carney visiting the White House, are adding optimism to the CAD's outlook.
Investor Caution Ahead of Fed's Rate Cut Path
Investors are taking a wait-and-see approach as they await more clarity on the Federal Reserve's rate-cut path, particularly in light of the upcoming FOMC monetary policy meeting. However, the market is eager to hear from the Fed about its stance, especially after recent US macro data has eased recession concerns.
USD/CAD – Technical Analysis
USD/CAD is trading near $1.38227 after rejecting the descending trendline that has capped price action since April. The pair tested the trendline around $1.38393, posting a near-term rejection candle—a classic shooting star—followed by lower-volume indecision candlesticks (doji and spinning tops), signaling fading bullish momentum.
Price remains beneath the downward-sloping trendline and is also hovering around the 50-period EMA at $1.38177, which has flattened, reflecting a neutral to mildly bearish bias.
Sellers appear to be defending the $1.38481–$1.38393 supply zone, making it a critical short-term resistance area. Below current levels, the first major support lies at $1.37945, with further downside potential toward $1.37893 and $1.37767.
The RSI stands at 49.99, below the 50 neutral line, suggesting neither overbought nor oversold conditions, but lacking bullish conviction. No clear divergence is visible at the moment, though a bearish RSI crossover confirms weakening upward momentum.
Structurally, the pair has been carving out lower highs beneath the trendline and is at risk of resuming the broader bearish channel unless bulls retake $1.38626.
No reversal candle patterns such as three white soldiers or bullish engulfing are present, indicating the recent bounce may be corrective. The setup now favors short entries if the pair breaks below $1.38254 with follow-through, targeting $1.37893, while risk is managed above $1.38481.
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