USD/CAD Price Forecast: Bullish Momentum Prevails Above 1.3880, Eyes on Key Resistance Levels

The USD/CAD pair is maintaining a bullish trajectory, hovering near the 1.3880 mark, its highest level since May 21. The third consecutive day of upward movement indicates that the bullish sentiment remains intact, primarily driven by the divergence between the Federal Reserve’s (Fed) hawkish stance and the dovish policy expectations from the Bank of Canada (BoC).

Key Drivers for USD/CAD Bullish Momentum

1. Fed’s Hawkish Policy Outlook:
   The release of the hawkish Federal Open Market Committee (FOMC) Minutes on Wednesday bolstered the US Dollar. With market participants pricing in further rate hikes by the Fed, the USD remains well-supported, further pushing the USD/CAD pair higher.
2. BoC’s Dovish Shift:
   On the other hand, the Bank of Canada’s dovish tilt has kept pressure on the Canadian Dollar, particularly as oil prices, a key Canadian export, saw a modest uptick. Despite this, the BoC’s cautious approach regarding interest rate hikes has kept the CAD on the back foot.
3. Technical Breakout:
   The breakout through the 100-day Simple Moving Average (SMA) this week has reinforced the bullish outlook for USD/CAD. This technical development supports the idea that the pair may continue to advance, with the next targets being higher resistance levels.

Technical Indicators and Price Action

• Support and Resistance Levels:
  The immediate resistance for USD/CAD stands at 1.3900. A sustained break above this psychological level would likely push the pair further towards the 1.3950 area, followed by the critical 1.4000 mark. If the 1.4015 zone is cleared, it would provide a fresh bullish trigger for the pair, extending its gains. On the downside, the 1.3855-1.3850 region is acting as immediate support, with the 1.3800 level providing a crucial cushion. A further dip towards the 100-day SMA around 1.3790 could prompt buying interest. A break below 1.3790 would expose the 1.3750-1.3720 range, with 1.3700 acting as the final support before the bearish outlook takes over.
• Momentum Indicators:
  Oscillators on the daily chart are currently in positive territory, supporting the continued upward trend for the USD/CAD pair. This suggests that, unless a significant bearish catalyst emerges, the path of least resistance is to the upside.

Near-Term Outlook

The USD/CAD pair is expected to maintain its bullish bias unless there is a substantial pullback. Any dips toward the support levels near 1.3800 and the 100-day SMA could be seen as buying opportunities, as the overall technical structure remains constructive.

A break above 1.3900 would likely prompt further buying, pushing USD/CAD towards the 1.3950 and 1.4000 levels. On the other hand, a significant break below the 1.3790 mark could shift the bias toward the downside, opening the door for a deeper retracement.

Conclusion

USD/CAD is poised for further gains in the near term, driven by the Fed’s tightening path and a dovish BoC stance. Traders should watch key levels of support at 1.3800 and resistance at 1.3900, as a break in either direction could determine the pair’s next major move.

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