- Traders are being cautious ahead of the Bank of Canada (BOC) decision on Wednesday, leading to a predicted drop in USD/CAD towards 1.3700.
- The technical indicators favor bearish movements, as USD/CAD remains within a downward channel, with 1.3700 acting as a short-term support level.
- Momentum indicators show signs of fatigue; the RSI is indicating overselling, while the MACD is losing its bearish momentum.
The Canadian Dollar (CAD) is positioned against the US Dollar (USD). On Tuesday, the USD/CAD pair traded mostly sideways during the US session, hovering around 1.3720. Earlier in the day, as the Greenback tried to recover slightly, it faltered despite better-than-expected job reports. Market sentiment remains cautious with traders anticipating the BOC’s rate decision on Wednesday, where a stabilization in interest rates is expected.
Looking at the technical side, the trend remains bearish. The USD/CAD has been stuck in a stable downward channel since March, recording lower values frequently. We’ve identified immediate support near 1.3700, which has functioned as a temporary floor in recent sessions. If it breaks below this level, stronger support could emerge around 1.3600, possibly triggering selling pressure that might expose the 1.3520-1.3500 range.
On the flip side, for a recovery to gain traction, the pair would need to clear the 21-day exponential moving average at 1.3832. This is a crucial resistance point that has capped recent upward movements. A break above the channel and the 1.3850 area would signal a stronger bullish position, potentially setting sights on the 1.4000 threshold.
That said, indicators suggest that bearish momentum is starting to wane. The RSI is currently just above the sell threshold of around 35—not extreme, but it hints that selling pressure could be weakening. The RSI has stayed below 50 for most of the last month, meaning sellers have held the upper hand for quite some time. Some buyers might begin to explore entry points. Meanwhile, the MACD remains negative, yet its histogram is shrinking, indicating that bearish forces might be losing traction. If the psychological level of 1.3700 holds, the pair could be poised for some short-term rebounds.
