USD/CAD rebounded off its 200-day and 200-hour moving averages this week but stalled at a downward-sloping trendline that has now rejected the pair five times. The move higher came as fresh U.S. inflation data lifted Federal Reserve rate-hike expectations, while trade tensions between Washington and Ottawa kept the Canadian dollar on the back foot despite elevated oil prices.
Buyers defend key moving-average support
USD/CAD is moving higher as the trading week closes, extending its range after buyers stepped in against a cluster of moving averages. The pair found buyers near its 200-day moving average at 1.38323 and 200-hour moving average at 1.38258. When two technically important averages sit close together, the zone becomes more significant, giving buyers a clear level against which to measure and limit risk.
The rebound pushed the pair back above the 50% midpoint of the 2026 trading range at 1.38663 and briefly through the swing area between 1.38669 and 1.38770. However, the advance stalled against a downward-sloping trendline connecting the July, late-July, early-August and early-September highs. That trendline has now attracted sellers on five separate tests, confirming it as an important ceiling heading into next week.
The technical battle lines for next week
For buyers to take control, the pair needs to break above the trendline and hold above the 50% retracement at 1.38663. Doing both would open the door to the 100-day moving average at 1.39271 as the next target.
For sellers, holding the trendline and pushing the price back below the 50% retracement would keep the broader downside bias intact. That would put the 200-day and 200-hour averages back in focus as downside targets, and a break below both would open the way toward the 100-hour moving average at 1.38096, followed by support between 1.37655 and 1.37780.
Dollar strength meets trade tensions
Fundamentally, the move higher was supported by renewed U.S. dollar strength after inflation data increased expectations that the Federal Reserve could raise interest rates. Higher U.S. rate expectations tend to support the dollar because they can make dollar-denominated assets more attractive to global investors, and elevated inflation readings keep those expectations in play. Meanwhile, the Canadian dollar lagged despite elevated oil prices, which would normally offer support since Canada is a major energy exporter.
Trade tensions add further pressure on the loonie. The escalating dispute between the United States and Canada, including new U.S. tariffs and Canadian retaliatory measures, creates uncertainty for Canadian exports, business investment and economic growth. Because Canada depends heavily on trade with the United States, that uncertainty can make investors less willing to hold Canadian dollars.
Source: Investinglive
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