USDCAD chart hints at potential reversal down to 1.375

The USDCAD currency pair rebounded from the 1.372–1.375 range and continued moving upward. Over the past week, the price has risen significantly, but now several headwinds are present. The 200-day moving average serves as the nearest resistance, which USDCAD failed to breach in late August. The upper Bollinger Band and the level of 1.39 are slightly above and have the potential to reverse the price back to 1.375.

On the daily chart, a head-and-shoulders pattern is gradually taking shape, indicating a probable pullback from its neckline. The Stochastic lines crossed near the overbought zone, confirming a sell signal. Traders should take at least some profits from their short positions at 1.375. This is particularly important if the right shoulder formation is not accompanied by increasing trading volume.

The Canadian dollar's local weakness was driven by a negative labor market report for August. The national economy lost more than 65,000 jobs, and the unemployment rate jumped to a 4-year high of 7.1%. This supports the scenario that the Bank of Canada will cut its key rate at its next meeting on September 17. However, a similar logic could be applied to the situation in the United States. Friday's data from the US Bureau of Labor Statistics also fell short of expectations, compelling the Fed to resume its monetary easing cycle.

That said, the state of the American labor market might be worse than the recent report showed. Yesterday, revised figures for the period from April 2024 to March 2025 were published. The number of job openings decreased by more than 900,000, and the average monthly growth nearly halved from 147,000 to 71,000. Although it is unlikely to force the Fed to cut rates immediately by 0.5% next Wednesday, the stance of Jerome Powell and his colleagues will probably be more dovish.

Take into account this trading plan:

Sell USDCAD at the current price. Take profit: 1.375. Stop loss: 1.39.