USD/CAD Price Forecast: Advances above 1.4050 with moving averages in sight

• The falling wedge’s lower boundary, near 1.3950, could be the next downside target for USD/CAD.
• A reading near 45 on the 14-day Relative Strength Index points to bearish momentum.
• Immediate resistance is being tested where the 50- and nine-day EMAs converge at 1.4066 and 1.4067, respectively.

A 25-basis-point interest rate increase is expected from the Bank of Canada (BoC) later on Wednesday. Ahead of the decision, USD/CAD is trading near 1.4060 during European hours, advancing for a third successive day.

On the daily chart, price action remains contained within a falling wedge. This technical formation suggests the possibility of a bullish breakout as selling momentum fades.

The near-term outlook for USD/CAD remains bearish, with spot trading just below a closely grouped set of Exponential Moving Averages (EMAs). Immediate resistance comes from the 50-day EMA near 1.4066 and the nine-day EMA around 1.4068.

Having failed to hold its recent highs, USD/CAD has moved below these trend indicators. Meanwhile, the 14-day Relative Strength Index (RSI), at around 45, points to persistent bearish momentum rather than outright oversold conditions.

A decline towards the falling wedge’s lower boundary near 1.3950 remains possible for USD/CAD. Should the pair break beneath the wedge, further selling pressure could take it towards the five-month low of 1.3732 reached on 21 May. Beyond that, support stands at 1.3481, the lowest level since October 2024.

At present, USD/CAD is challenging a confluence of immediate resistance: the 50- and nine-day EMAs at 1.4066 and 1.4067, respectively, which coincide with the falling wedge’s upper boundary. A move above this area would clear the way for a potential advance towards 1.4299, the near 18-month high recorded on 14 October.

Fed expected to hold rates this week as December hike remains possible

With the Fed expected to leave rates unchanged at this week’s meeting, ABN Amro strategists nevertheless highlight “some risk of hawkish dissents”. Although they recognise that “inflation remains too hot,” their view is that “declining breadth and a cooler labour market give the Fed room to wait.” They point to a corresponding change in market expectations, noting that investors have “sharply reduced the probability of an October hike, and December is no longer fully priced.” Even so, ABN Amro continues to anticipate “one final 25bp hike in December, followed by an extended hold.”

BoC decision retains potential to surprise markets

Market pricing ahead of today’s BoC decision points to “an 80% probability of a rate hike,” according to analysts at MUFG/BTMU. In their assessment, that “is not quite in done-deal territory and there is scope for a surprise.” Although investors favour another BoC rate increase, the analysts suggest that enough uncertainty remains for the meeting to be a live event for markets.

(The technical analysis of this story was written with the help of an AI tool. Know more.)