The USDCAD pair has often tested a crucial support area between 1.3813 and 1.3832, with buyers stepping in each time to push prices higher. Right now, the price is back in this zone, hitting a low of 1.3823, which is right in the middle of the support range.

Key Moving Averages

Below this zone, important moving averages are present, such as the 100-bar MA on the 4-hour chart at 1.3804 and the 100-day MA at 1.3768. For sellers to gain momentum, they need to break below this broader support area. On the flip side, buyers must defend this zone to keep pushing prices up. If the pair stays within this support area, focus will shift to the 38.2% retracement level of the March-to-July decline, which is at 1.3923. Last week, the pair failed to break through this level before Fed Chair Powell’s speech. This failure makes the retracement level act like a ceiling, currently favoring a downward trend. With moving averages clustering below, there is a clear area where buyers and sellers could change the game’s direction. Buyers need to maintain support to shift momentum in their favor. The USDCAD pair has returned to a vital support area between 1.3813 and 1.3832, a level buyers have defended twice. A significant cluster of moving averages lies just below 1.3804, making this zone a critical battleground. Buyers are under pressure to hold this line to avoid a deeper decline.

Market Dynamics and Influences

This technical challenge comes after recent US inflation data for July 2025 showed a higher-than-expected rate of 2.9%. This reinforces the Federal Reserve’s firm, data-driven stance. In contrast, the Bank of Canada is concerned about a slowing domestic economy, which creates a policy gap that currently favors the US dollar. This adds more weight on the Canadian dollar, underscoring the importance of holding the 1.3800 support level. Additionally, we have seen weakness in energy markets, with WTI crude oil prices falling near $78 a barrel after unexpected inventory reports. This drop negatively impacts the commodity-linked Canadian dollar, further supporting the USDCAD pair at this level. A similar situation occurred in late 2023 when falling oil prices pushed the pair higher. For derivative traders, successfully defending the current support zone may provide a chance to position for another test of the 1.3923 resistance. This ceiling, which represents the 38.2% retracement level, held strong last week. Buying near-term call options could be a strategic move to benefit from a bounce off the current support. On the other hand, a decisive break below the moving average cluster around 1.3768 would send a strong bearish signal, indicating that sellers are in control. Such a move could trigger stop-loss orders and lead to a quicker decline. In this case, traders might look into buying put options to profit from a potential drop toward the summer lows. Create your live VT Markets account and start trading now.

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