The USDCAD encountered resistance at its 100-day moving average of 1.37738 and the 100-bar moving average on the 4-hour chart at 1.37516. Initially, sellers pressured the pair, but buyers then pushed it higher during early trading.

Breakout Beyond Key Levels

Recent stronger-than-expected PPI data allowed the USDCAD to break above the 100-day moving average. This led the pair to rise past last week’s high of 1.3805, reaching up to 1.3817. Now, the 100-day moving average serves as an important level for potential upward movement. If the USDCAD stays above its current levels, it may aim for 1.3860, which is in line with the May 29 high, and further target 1.38789, the high from two weeks ago. Surpassing these points would shift focus to the 38.2% retracement level at 1.39229. If the pair fails to hold above these resistance levels, it may continue to move sideways. Therefore, current levels are crucial for predicting future price trends.

Trading Strategy and Market Dynamics

With the recent breakout over key moving averages, we have a clear bullish outlook for USDCAD. The break above the 100-day moving average at 1.3773 was driven by strong US economic data. This trend was supported by the July 2025 US CPI data from last week, which came in at 3.4%, slightly above expectations, putting pressure on the Federal Reserve. For traders, this suggests using the 100-day moving average as a new support level for bullish strategies. Any dip toward the 1.3775 area presents a potential opportunity to buy call options or enter long futures positions. This approach is underscored by recent disappointing data from Canada, where June 2025 retail sales unexpectedly fell by 0.5%, indicating a growing policy gap between Canada and the US. Looking back, this situation resembles late 2024 when the Federal Reserve’s hawkish stance contrasted with a more cautious Bank of Canada, leading to a sustained upward trend in this pair. Our immediate upside targets are 1.3860 and then 1.3879. A clear break above these levels could lead to additional buying and pave the way towards the 38.2% retracement level at 1.39229. In the coming weeks, our strategy involves positioning for further upward movement while managing risk below the 1.3773 level. Protective puts may be worth considering if prices drop below this critical support, as that would negate the current bullish momentum. Until then, the path of least resistance looks upward, as long as the pair remains above this key technical level. Create your live VT Markets account and start trading now.

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