Pair trades near 1.3690, gaining after losses despite a bearish technical outlook

    by VT Markets
    /
    Jul 22, 2025
    USD/CAD is currently testing a primary support level at a nine-month low of 1.3539. The market sentiment is leaning bearish, as indicated by the 14-day RSI being below 50. The first resistance to watch is the nine-day EMA at 1.3697. While the pair has bounced back to around 1.3690 after earlier losses, there is still bearish sentiment due to its sideways movement within a descending channel. The USD/CAD pair appears weak, trading below the nine-day EMA, with the RSI suggesting more bearish momentum ahead.

    Potential Support and Resistance Levels

    If USD/CAD breaks below 1.3539, it could target 1.3419, which is the lowest level since February 2024, and potentially drop to 1.3300. The immediate resistance levels to consider are the nine-day EMA at 1.3697 and the 50-day EMA at 1.3742. If USD/CAD breaks above this resistance, it may rise toward a peak of 1.4016. The Canadian Dollar experienced a significant decline against the US Dollar compared to other major currencies. The currency heat map shows changes in major currencies against each other, with the Canadian Dollar down by 0.08% against the US Dollar. Keep in mind that trading instruments involve risks. Always take precautions before trading. The information provided here is for informational purposes only and does not come with guarantees. Trading can lead to losses, including the potential loss of your investment.

    Market Analysis and Trading Strategy

    With a bearish market outlook and a 14-day RSI below 50, we see the most likely movement as downward. Traders could consider using put options or short futures positions. A decisive break below the 1.3539 support level would be a strong signal, confirming the descending channel pattern and pointing toward a target near 1.3419. However, it’s important to consider a significant fundamental factor. The Bank of Canada lowered its key interest rate to 4.75% on June 5th, becoming the first G7 central bank to ease its monetary policy. Generally, a rate cut weakens a currency, which poses a challenge for the Canadian Dollar. This situation is intensified by the U.S. Federal Reserve, which is keeping its rates higher for longer. With Canada’s economy slowing—evidenced by a rise in the unemployment rate to 6.2% in May—the case for a weaker Canadian Dollar is strengthening, contrasting with the bearish technical situation for the USD/CAD pair. Given this, it’s prudent to adopt a cautious approach, as a sharp market reversal could occur if fundamental factors outweigh the technical trends. Traders should closely monitor the nine-day EMA resistance at 1.3697. If USD/CAD can maintain above this level, it could challenge the bearish outlook and indicate that the market is starting to respond to differing central bank policies. In this case, we would adjust our strategy to capitalize on a potential rally towards the 50-day EMA and higher. This could involve buying call options to hedge against short positions or initiating new long positions. The clash between the weak technical indicators and the increasingly positive fundamentals makes straddles or strangles an intriguing, though more complex, option for traders focused on volatility. Create your live VT Markets account and start trading now.

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