Over the last 7 days, USDCAD has taken a tumble, sliding from a local peak near 1.41250 to 1.39900. The Canadian dollar, in turn, has staged an impressive rally, hitting a six-week high against its American counterpart.
What triggered this move? The greenback lost ground after the Federal Reserve's (Fed) July 29 meeting. Despite a surprisingly deep split—three policymakers calling for a hike—the central bank kept interest rates steady at 3.50%–3.75%. But the real blow came from the lack of a clear signal on September tightening. This omission was enough to spark a wave of dollar exodus and profit-taking on long positions. Still, the sell-off may have gone too far, too fast—leaving the door wide open for a corrective bounce. Put simply, the market may have overreacted.
Now, let's look at the other side of the equation. The Bank of Canada (BoC) remains stuck at 2.25%, keeping the interest rate gap firmly in the dollar's favor. The national economy is showing faint signs of life, though the regulator describes the improvement as gradual at best. With inflation not expected to return to the 2% target until early 2027, the central bank is in no hurry to hike. Such a dovish stance continues to weigh on the loonie, capping its upside.
On the technical front, USDCAD has bounced off the 1.39900 support—a clear sign that bulls are still active in this zone. As long as the pair holds above this level, the path of least resistance points higher, with a retest of 1.41250 as the next logical target. This tells us that the recent drop may be running out of steam.
The ultimate recommendation is to buy USDCAD at the current price (1.40100), aiming to reach 1.41250 within one month. To keep risk in check, place a Stop Loss order just below the 1.39900 support.
This content is for informational purposes only and is not intended to be investing advice.
