USDCAD Price Rebounding from Key Support as CAD Weakens

29 Mei

USDCAD is showing signs of a potential reversal from key support around the 1.3700–1.3685 zone. The pair had been declining steadily but recent weakness in the Canadian Dollar — driven by soft economic data and oil market uncertainty — is starting to shift momentum back in favor of the U.S. Dollar. As long as support holds, there is room for a bullish continuation toward 1.3860 or higher in the near term.

Technical Analysis (4H Chart)
Trend Structure: After a strong impulsive drop earlier in May, USDCAD formed a rounded bottom near 1.3685, followed by a corrective bounce. The recent retracement toward the support area is forming a potential higher low setup.

Support Zone:

Primary Support: 1.3700–1.3685
This is a clean structure zone and previous demand level. Price tested this area on May 24–25 and rebounded sharply.

Resistance Zone:

Short-Term Target: 1.3849–1.3860
This is the next major horizontal resistance, and aligns with previous price congestion before the latest decline.

Price Projection:
The chart suggests a bullish wave may develop from the support zone, targeting the 1.3860 level. If broken, a further move toward 1.3920 (May swing high) is possible.

Invalidation Level:
A daily close below 1.3680 would negate the bullish bias and signal a deeper correction or trend continuation lower.

Fundamental Analysis
U.S. Dollar (USD) Drivers:

Q1 GDP second estimate shows steady but modest growth.

Consumer Confidence fell recently, capping upside for the USD short term.

The Fed remains cautious, signaling that inflation risks persist — keeping interest rates elevated, which supports USD.

U.S. Treasury yields have been stable to slightly higher, also helping support the dollar.

Canadian Dollar (CAD) Drivers:

Canada's balance of payments posted a larger-than-expected deficit in Q1 — a negative for CAD.

Oil prices, which heavily influence CAD, have been under pressure from global demand uncertainty.

Domestic demand is softening: flat retail sales and weak trade balance data reduce CAD appeal.

Bank of Canada is showing signs of policy caution, especially as inflation slows faster than in the U.S.

Conclusion
Outlook: Short-term bullish
USDCAD is likely to bounce from the 1.3700–1.3685 zone and retest 1.3849–1.3860 if CAD weakness continues.

Trade Plan (if trading):

Buy Zone: 1.3700–1.3685

Target: 1.3860

Stop Loss: Below 1.3680 (structure break)

The pair is fundamentally supported by CAD weakness and technically primed for a rebound — but confirmation from price action near support is critical.

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Trade closed manually. Please refer to my updated analysis for the latest insights.