The downward trend will likely continue as sellers target the next key support at 1.2700.

Bearish View

• Sell the USD/CAD pair and set a take-profit at 1.2700.
• Add a stop-loss at 1.2850.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.2850 and a take-profit at 1.2950.
• Add a stop-loss at 1.2750.

The USD/CAD price came under pressure on Monday morning as the US dollar weakness continued. The pair slipped to a low of 1.2800, which was the lowest level since June 13 of this year. It has fallen by about 3.15% below the highest point this year.

Canadian Dollar Comeback

The USD/CAD price had a mixed performance in July. The pair initially rose to a multi-year high of 1.3228 as the US dollar strength continued. It then made a major pullback as investors embraced a relatively risk-on sentiment.

In July, data from Canada revealed that the economy was going through some challenges. Inflation surged to the highest level in more than three decades because of the soaring oil and gas prices. At the same time, the labor market weakened in June as the economy lost over 30k jobs.

On a positive note, the unemployment rate dropped to about 4.7%. This was the first time it moved below the important 5% since the pandemic started. Further data revealed that the economic recovery is moderating.

According to Statistics Canada, output in June rose by just 0.1% after it stalled in May. As a result, the economy expanded by about 4.6% on a year-on-year basis. As such, analysts expect that Canada’s economy will start to moderate after it recorded substantial growth in the first half of the year. Analysts believe that the economy expanded by 2% in Q2.

There will be no economic data from Canada on Monday. As such, investors will focus on the latest manufacturing numbers from the United States. Economists expect data by S&P to show that the PMI slowed to 52.3 in July. The other reading by the Institute of Supply Management (ISM) is expected to have dropped from 53 to 52.0.

USD/CAD Forecast

The four-hour chart shows that the USD/CAD pair has been in a strong bearish trend in the past few days. As a result, the pair has formed a descending channel that is shown in purple. It has also moved below the 25-day and 50-day moving averages while the MACD remains below the neutral point.

The USD/CAD price has moved slightly below the 50% Fibonacci Retracement level. Therefore, the downward trend will likely continue as sellers target the next key support at 1.2700. A move above the resistance level at 1.2850 will invalidate the bearish view.

Ready to trade our daily Forex forecast? Here’s a list of some of the best Forex trading platforms to check out.

The greenback has pulled back just a bit against the Canadian dollar during the Juneteenth holiday, as the market has dipped below the 1.30 level. We are at the top of a major trending channel, so it does make quite a bit of sense that we would see noise in this area. Because of this, the market looks as if it could get a little bit of breakdown from here, assuming that the overall range sticks.

If we were to turn around to break above the 1.31 handle, then it’s very likely that the US dollar will continue to go higher, but right now it certainly looks as if a pullback is more likely than not. That being said, it’s probably worth noting that as time has gone on, we have seen plenty of buyers on dips, and it’s worth noting that the overall trajectory of the market has been higher over the long term. I don’t think that changes anytime soon, but the attitude of this market is one that has been rather steady, which makes sense considering that the two economies are so heavily intertwined.

At this juncture, if we do pull back from here, then I think the 1.29 level is an area that you have to pay close attention to because it should be crucial. If we do break down below there, then it’s likely that we fulfill the back-and-forth that we have seen for some time, and therefore I would not be surprised at all to see this market go to the 1.27 level, followed by the uptrend line underneath, currently sitting at the 1.2550 region.

As soon as we break out of this channel, then we can start to make bigger decisions, but right now the channel has been extraordinarily reliable, so there’s no reason to fight the thought process. If we break to the upside, we would need to clear the 1.31 handle and close above there on a daily candlestick for me to start buying. At that point, it’s very likely that the market continues in more of a “buy-and-hold” manner. That being said, the fact that we did pull back on a rather quiet day does make sense, as there was nothing to drive the markets in general. While there is an oil component to this care, the reality is that the market will do whatever it wants to do.

Expect choppiness as per usual in this pair, but as long as we stay in the channel it’s easier to buy this market than to sell it.

The US dollar fell hard on Monday against the Canadian dollar as crude oil continues to attract a lot of attention. When you look at the longer-term chart, you can see that we are clearly in a massive channel, and now it looks as if we are trying to get to the bottom of it. Because of this, I would anticipate further downward pressure, but I would also expect a certain amount of support at the bottom of the channel. That is essentially the 1.2550 level and is rising as time goes along.

There are a couple of things to keep in mind at the moment. We just sliced through the 200-day EMA and look likely to close at the very bottom of the range. Having said that, it was also Memorial Day in the United States, meaning that most US-based traders were not online. I don’t know that it would have changed much, because oil continues to rise, but the drop may not have been as drastic.

If we do rally at this point, the 1.28 level would be a significant short-term resistance barrier to overcome. If we can break that, then it is likely that we go looking to the 1.30 level. Breaking above there then means that we will threaten the top of the channel. While the recent action has been very bearish, if you look back almost a year, we have been gradually rising over time. Because of this, I would anticipate that the channel should hold, and certainly would be interested in buying the US dollar on some type of balance in that general vicinity. However, if we were to turn around and break down below the 1.24 level, it’s likely that the US dollar would be in serious trouble.

In the massive “risk-off environment” that we seem to be in, it’s difficult to imagine that the US dollar will melt down against the Canadian dollar. That doesn’t mean that the Canadian dollar cannot rally, especially with oil spiking the way it has. This might be one of those situations where the Canadian dollar does much better against the greenback than many other currencies, but that doesn’t necessarily mean that it needs to run it over either. Expect choppiness as per usual in this pair, but as long as we stay in the channel it’s easier to buy this market than to sell it.

It certainly seems as if there are a lot of buyers right here where we are right now.

The Canadian dollar shot higher in value against almost everything during the trading session on Wednesday as the market has shown itself to be very pro-Canadian in the short term. After all, the CPI numbers in several other inflation numbers came out stronger than anticipated during the trading session, and therefore people are starting to bet on the Bank of Canada becoming a bit more aggressive than what they had stated previously.

That being said, the US dollar has crashed into the 1.25 level, an area that has been supported more than once. The 1.25 level has been the bottom of a larger consolidation area, so it is very important to see this area hold. So far, it has, and one has to wonder whether or not we are going to continue to see any momentum, or if we have simply fallen back to the bottom of the same range before we turn around and show signs of buying again.

The 200 Day EMA is at the top of the candlestick and therefore it is likely that it will continue to offer a significant amount of resistance, just above the 1.26 handle. Quite frankly, this is a market that I think continues to see a lot of noisy behavior in this general vicinity, and therefore it is going to be difficult to figure out our directionality until we get yet another impulsive candlestick.

If you look at the hammer from a couple of weeks ago, breaking down below that level could signify quite a bit of selling pressure. That is near the 1.24 handle, as it is an area where we had seen the market come in and start buying again. Breaking down below that level would open up a huge move lower, perhaps even dropping the dollar down to the 1.20 area. That obviously would be a big deal, so be interesting to see how that plays out. Ultimately, if we were to turn around and take out the 1.2650 level, then that could open up the possibility of a move to the 1.29 level eventually. Ultimately, this is a market that I think continues to see a lot of choppiness, but it certainly seems as if there are a lot of buyers right here where we are right now. In general, the next day or two should tell us a lot.