In recent days, the USD/CAD exchange rate witnessed a noteworthy rebound after a period of declining performance. This resurgence was unexpected for many traders who anticipated that the pair would continue its bearish trend. Recent developments have introduced fresh volatility into the market, primarily driven by the announcement that the U.S. president would not extend the monthly pause on tariffs. The implementation of these tariffs on imports from Canada, Mexico, and China could take effect as early as next week, stirring renewed strength in the U.S. dollar.
Upon examining the technical landscape, it becomes clear that the current bullish rally in USD/CAD may exhibit signs of vulnerability. After bottoming out near the support level of 1.4150, the pair surged toward a critical resistance point at 1.4470. However, the prevailing technical indicators paint a cautious picture. Both the Relative Strength Index (RSI) and the stochastic oscillator are nearing overbought levels, signaling that the rally could lose momentum without a decisive breakthrough above 1.4470.
Traders are advised to keep an eye on this level, as its breach could open the door for a further ascent. Subsequent targets would likely surface around 1.4530, and ultimately, traders might look toward the 2020 peak of 1.4667. Should bullish sentiment maintain its grip, the psychological barrier of 1.4800 might soon come into play.
While the recent bounce back is certainly a positive development for USD/CAD, caution is warranted. The immediate support levels, notably around the 20- and 50-day exponential moving averages (EMAs) and the 38.2% Fibonacci retracement level near 1.4270, could act as a buffer against downward pressure. A significant dip below this zone could signal a shift in momentum, potentially driving the pair back to the 1.4100-1.4150 range. Such a failure to maintain this support would likely amplify bearish sentiments and could lead to a test of the critical 1.4000 psychological mark, as well as the 200-day simple moving average.
While the USD/CAD pair’s recent rebound offers a glimmer of hope for bullish investors, the dynamics are precarious. The impending tariffs could bring further uncertainty, and the fragile nature of the current recovery warrants a prudent approach. Until the pair can decisively break through the 1.4470 resistance, traders should remain vigilant, as the situation may evolve into a classic bull trap. Continuous monitoring of both technical indicators and geopolitical developments is essential for informed decision-making in this fluid market environment.