USDCAD fluctuates within set levels as traders wait for a significant breakout in momentum.

    by VT Markets
    /
    Jul 24, 2025
    The USDCAD currency pair has bounced back, finding support in the 1.3589 to 1.3594 range, which has held in earlier trading sessions. This move pushed the pair up to 1.3628, a key resistance level that aligns with the highs from today and yesterday. Attempts to break through the 1.3628 resistance have not been successful, keeping the pair trapped between 1.3589 and 1.3628. If it climbs above 1.3628, it could aim for 1.36388, 1.3651-54, and 1.3684, all of which correspond to previous technical signals. On the other hand, if it dips below 1.3589-94, it may target 1.3574, 1.3555, and 1.3539.

    Impact of Canadian Retail Sales

    Looking at the economy, Canada’s retail sales fell by 1.1% in May, matching expectations. However, a preliminary report for June shows a 1.6% increase, hinting at possible improvements ahead. Trade issues with the U.S. impacted 32% of retail businesses in May, causing higher costs and weaker demand. Market participants should keep an eye on a clear breakout to gauge the next move. Given the current volatility, it’s wise to monitor price changes closely. We see the current tight trading range as a chance for strategies that can benefit from either a breakout or continued range movement. This indecisiveness reflects the market’s consideration of mixed economic signals from both countries. Traders should be ready for a clear move instead of getting stuck in fluctuations. A continued rise in WTI crude oil prices, which are currently above $81 per barrel, could boost the Canadian dollar. If this strength holds, we anticipate a potential break below the 1.3589 support, signaling a shift in momentum towards the lower swing points mentioned earlier.

    Potential Trading Strategies

    However, we believe the higher likelihood is a move upwards, driven by differing central bank policies. Canada’s annual inflation unexpectedly dropped to 2.7% in June, giving the Bank of Canada room for more rate cuts, while the U.S. Federal Reserve remains cautious. This policy divergence should favor a stronger U.S. dollar against the Canadian dollar. For traders expecting a sharp move without a clear direction, an option strategy like a long straddle or strangle could capture a breakout from the current range. Conversely, for those who share our bullish outlook, a bull call spread might be a cost-effective way to aim for higher price targets. This strategy limits risk while taking advantage of a potential push toward the 1.3684 level. Historically, times of differing monetary policies between the two central banks have led to strong trends in this currency pair. The current situation is reminiscent of past periods when interest rate differentials sparked significant breakouts. Therefore, we will closely watch for a clear breach of the established range to confirm the next move. Create your live VT Markets account and start trading now.

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