The USDCAD currency pair recently found support near a key swing area and the 100-bar moving average, leading to a small bounce. This week, resistance has been noted between 1.38917 and 1.3804, with buyers stepping in at 1.38176 against the 100-bar moving average on the 4-hour chart. Last week’s weak job reports from Canada and the U.S. raised expectations for possible rate cuts by both the Fed and the Bank of Canada. Important announcements are scheduled for Wednesday: the BoC at 9:45 AM ET and the FOMC at 2 PM ET.

Technical Stability and Resistance

The USDCAD is currently stable after finding support at the 200-bar moving average on the 4-hour chart at 1.38048. The price then rose to the lower boundary of a swing area, where it faced resistance. Since then, the pair has retreated and is testing the 100-bar moving average again at 1.38176. The technical outlook shows resistance between 1.38917 and 1.3904 and support at the 100-bar moving average. If the price breaks below these averages, it could target 1.37635. Conversely, if it moves above 1.38917-1.3904, it might rise to 1.39235. As support holds, buyers have a short-term advantage ahead of the central bank decisions. We see the USDCAD trading in a narrow range with clear technical limits. Buyers are protecting support near 1.3817, while sellers are limiting gains near the 1.3904 resistance. This price stability suggests a significant price movement is on the way as we wait for a catalyst.

Interest Rate Decisions and Market Impact

Next week’s main focus will be the interest rate announcements from the Bank of Canada and the U.S. Federal Reserve on Wednesday. Last week’s economic data sent a strong signal, with U.S. non-farm payrolls rising by only 110,000 and Canada experiencing a loss of 5,000 jobs. These results have raised the likelihood of coordinated rate cuts. Due to the uncertainty before these announcements, using options to trade the anticipated surge in volatility seems wise. A long straddle—buying both a call and a put option at a strike price close to the current market—might be an effective strategy. This approach profits from sharp price movements in either direction, helping to avoid losses from incorrect predictions about central bank decisions. For traders using futures, it’s best to wait for a confirmed breakout from the current range. A close above 1.3904 would trigger a long position, targeting the August 2025 highs near 1.3923. On the other hand, breaking below the 1.3804 support could open short positions, with an initial target around the 100-day moving average near 1.3763. We recall the aggressive rate hikes in 2022 and 2023. The Bank of Canada might feel pressured to cut rates due to weaker domestic data, especially the recent GDP figures from earlier this summer. If the BoC hints at a more aggressive easing than the Fed, it could lead to strong upward momentum for USDCAD. This shift in policy will be key to watch on Wednesday. Create your live VT Markets account and start trading now.

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