The USDCAD moved sharply higher earlier this week, supported by renewed trade tensions after the U.S. announced 50% tariffs on selected Canadian goods. The tariff headlines gave the U.S. dollar a boost against the Canadian dollar, helping the pair recover from the week’s lows and shifting the short-term technical picture back in favor of buyers.
That upside momentum culminated yesterday when the pair climbed above its 200-hour moving average (green line on the chart below) for the first time since July 8. Reclaiming that key technical level was an important development, signaling that buyers were beginning to regain control after spending nearly two weeks below the longer-term intraday trend gauge. The rally then extended toward an important resistance area near 1.4116, defined by the July 10 swing low and the July 14 swing high. Today’s high reached 1.4111—just five pips shy of that target—before buyers began to lose momentum.
Since failing to extend through that resistance zone, the pair has rotated lower. During the European session, the decline brought the price back to test the 200-hour moving average, and that level has once again been challenged in early North American trading. The 200-hour moving average currently sits at 1.40779. Today’s low reached 1.40778—essentially a perfect test of that support—before modest buying emerged. The pair is currently trading near 1.40823.
This leaves the 200-hour moving average as the key barometer for the short-term outlook. As long as the price remains above that level, buyers retain a modest technical advantage. However, a sustained move back below the 200-hour moving average would neutralize the recent bullish bias and shift attention toward the rising 100-hour moving average at 1.40541. A break below both moving averages would indicate that sellers have regained short-term control and would increase the likelihood of a deeper correction.
Looking at the broader picture, the low for the week came in at 1.4003, just above the psychologically important 1.4000 level. That decline also stopped short of the 38.2% retracement of the rally from the early May low to the triple-top highs near 1.42473 reached during the second half of June. Holding above that Fibonacci retracement suggests the larger uptrend remains intact. For sellers to strengthen their case, they would first need to regain control below the 200-hour and 100-hour moving averages and eventually push the pair below that 38.2% retracement level. Until then, the technical advantage remains tilted toward the buyers, although they now need to defend the 200-hour moving average to maintain that edge.
This article was written by Greg Michalowski at investinglive.com.