USDCAD is poised to test resistance due to fundamental support

The USDCAD currency pair opened at 1.38443 on Wednesday. The price has been fluctuating near this level since the early trading hours. This follows a recent rally, which occurred as the Canadian dollar dropped after the national central bank cut interest rates and a pessimistic employment report was released. At the same time, its American counterpart was supported by the Federal Reserve’s (Fed) more hawkish stance, even though the US regulator also reduced borrowing costs.

The Bank of Canada (BoC) has found itself in a predicament. After the September rate cut, investors expect a similar step in October, keeping the loonie under pressure and making the US dollar more appealing to market players. On Tuesday, BoC Chair Tiff Macklem highlighted the need to support the national economy amid US trade tariffs but not at the expense of monetary conditions. This statement worsened a long-term outlook, reinforcing pessimistic sentiment among investors.

However, the Canadian dollar is now receiving limited support from oil prices—the country’s key export commodity. The cost of WTI has increased amid reduced US inventories and ongoing tensions in Eastern Europe that affect energy supply chains. But the appreciation in crude oil is not yet enough to shatter pessimism around the loonie, as markets are factoring in structural issues like low production activity and high dependence on trade relations with the US.

From a technical standpoint, a rebound from the lower limit of the flat trend is seen on the USDCAD daily chart. The price is approaching the first key resistance at 1.38630, which is confirmed by the Chaikin Oscillator’s ascent into positive territory, signaling increasing buyer activity. The Stochastic Oscillator (68/58), however, is nearing the overbought zone, indicating that the current upward move is exhausting, and a correction is probable.

Consider the following trading strategy:

Buy USDCAD amid the pair’s short-term correction below 1.38250. Set Take profit at 1.39000. Place Stop loss at 1.37600.

The forecast is valid from September 24 to October 1, 2025.