The USD/CAD currency pair is at a critical technical juncture, trading around 1.3810 during early European hours on Friday. Following a minor pullback from recent highs, the pair is now testing key support zones that could either confirm a deeper bearish trend or set the stage for a bullish reversal.
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Let’s break down the short-term technical outlook and key price levels to watch in the coming sessions.
USD/CAD Testing Key Psychological and Technical Support Near 1.3800
The 1.3800 level serves as a psychological support and a key technical pivot for the pair. Just below this, the six-month low at 1.3781—last seen on April 21—acts as an immediate barrier. This zone also aligns with the upper boundary of a descending channel, adding to its importance.
If USD/CAD breaks below 1.3781, it could confirm a return inside the descending channel, reinforcing the bearish momentum and potentially targeting:
- 1.3419, the lowest level since February 2024
- The lower boundary of the descending channel, near the 1.3350 area
A decisive drop below 1.3781 would reignite selling pressure and reestablish the downward trend that has dominated over the past few months.
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Technical Indicators Show Mixed Momentum
Despite recent weakness, there are early signs of a potential bullish shift:
- The pair is still trading below the nine-day EMA (1.3845), indicating short-term bearish control.
- However, a break above this EMA would improve short-term momentum and could shift sentiment in favor of buyers.
- The 14-day Relative Strength Index (RSI) remains above 30, suggesting that while the bias is bearish, the market isn’t yet oversold.
This mix of signals makes the 1.3800–1.3845 range critical for determining the near-term direction.
What Happens If USD/CAD Breaks Above 1.3845?
If buyers manage to push the pair above the nine-day EMA at 1.3845, this would be an early signal of bullish reversal. The pair could then target the following levels:
- 1.4077 – 50-day EMA and a key resistance area
- 1.4415 – Two-month high and a technical ceiling
- 1.4793 – A major resistance level not seen since April 2003
Such a move would represent a significant shift in momentum and invalidate the current descending channel setup, suggesting a medium-term bullish trend could be forming.
Conclusion: All Eyes on the 1.3781–1.3845 Zone
The USD/CAD pair is at a technical crossroads. A break below 1.3781 could trigger a deeper decline toward February lows, while a break above 1.3845 may hint at a bullish breakout from the descending channel.
Traders should watch for confirmation from price action and RSI signals in the coming days to determine whether the current pullback is a temporary correction or the beginning of a broader reversal.