As the previous analysis indicated, the USDCAD pair successfully reversed its negative trend to hit new summer highs. After an initial surge in July, the price pulled back and consolidated around the 1.375 level. Last week, a fresh wave of growth emerged from this threshold, driving quotes up to test the 200-day moving average (EMA 200). The price hasn't been above this key point since mid-April, and if it breaks out, investors could see a continuation of the movement toward the 1.398–1.4 range.
Any potential correction is likely to be limited by 1.375. This level has acted as both stiff resistance and support over the past few months. The threshold is made even stronger by the nearby 50-day moving average and middle Bollinger Band. The MACD indicator is consolidating in positive territory, thus supporting the potential for successfully testing the EMA 200 and the upper Bollinger Band. The overriding goal of the current uptrend is to reach May highs near the round 1.4 level.
On the monthly chart, USDCAD is trying to regain the momentum it had in mid-2021. The trendline was broken during the first half of the summer, but present-day price dynamics suggest the breakdown may have been false. A shift toward a medium-term recovery is supported by consecutively higher lows on the daily chart, a pattern that developed from the June 1.354 bottom.
Fundamentally, the Canadian dollar is weakening due to the recent publication of July's CPI data. Reported headline inflation slid from 1.9% to 1.7%, matching market expectations. Although underlying core measures present a different picture, the likelihood that the Bank of Canada will cut the key rate in September has increased to nearly 40% because of this slowdown. Investor expectations for monetary easing have also extended to October—a scenario that was not previously considered.
Given the aforementioned perspective, the following trading strategy is worth considering:
Buy USDCAD at the current price. Take profit: 1.398. Stop loss: 1.375.
This content is for informational purposes only and is not intended to be investing advice.
