USD/CAD approaches strong resistance after four consecutive days of gains, with central bank decisions becoming key
2025-07-29 20:58:15
On Tuesday (July 29), the US dollar/Canadian dollar (USD/CAD) rose for the fourth consecutive trading day, trading around 1.3770 in pre-market trading. The US dollar strengthened against major currency pairs, benefiting from the tariff agreement between the US and the EU. The US dollar index (DXY) recently rose to 99.00, a near one-month high. Against this backdrop, the Canadian dollar continued to come under pressure. Market attention will turn to the upcoming US June JOLTS job openings data, as well as Wednesday's interest rate decisions by the Federal Reserve and the Bank of Canada.
The dollar's strength this week was primarily driven by positive developments in the trade arena. New tariff arrangements between the United States and the European Union eased market concerns about a potential escalation in global trade friction, supporting both safe-haven and fundamental demand for the dollar. Traders believe the recent tariff arrangements strike a balance between negotiating intensity and market tolerance, helping to extend the dollar's upward trend.
The US dollar index hit 99.00, a near one-month high, indicating strong buying demand for the US dollar. Meanwhile, recent Canadian economic data has been subdued, especially against the backdrop of volatile energy prices and slowing export growth, leaving the Canadian dollar lacking momentum. While the Bank of Canada is expected to maintain interest rates, the Canadian dollar appears relatively vulnerable against the backdrop of continued hawkish US monetary policy.
Of note, the June JOLTS job vacancies data for the US, due to be released this evening, is expected to show 7.55 million, down from 7.77 million in May. If the data beats expectations, it will further solidify the dollar's strength; if it falls short, it could put short-term downward pressure on the exchange rate. Overall, the market remains cautious ahead of the central bank's decision, with short-term capital flows still favoring the dollar.
The daily chart shows that USD/CAD has continued its recent rebound, once again approaching key resistance. Bollinger Bands indicate that the middle band is at 1.3672, and the exchange rate is currently trading near the upper band, indicating bullish technical momentum. The upper band at 1.3781 has become the primary resistance level; if broken, further upside targets would be 1.3850.
Regarding the MACD indicator, the DIFF line is at 0.0004, the DEA is at -0.0007, and the MACD histogram has turned red to 0.0023, indicating that short-term bullish momentum is accumulating. A golden cross has formed, and if the momentum continues, it will help the exchange rate to test the 1.38 mark.
The Relative Strength Index (RSI) is currently at 58.54, not yet in overbought territory, but significantly above its previous average, indicating increasing buying momentum. The upward trend in the RSI suggests continued short-term bullish momentum, but caution is warranted regarding potential pullbacks in the 60-65 range.
Overall, the exchange rate has been gradually rising recently, currently standing above 1.3750. Upward resistance is concentrated in the 1.3780-1.3850 range. A break above this area would further expand technical upside potential. Downward support is at 1.3730. A break below this level could lead to a return to the middle Bollinger band near 1.3672.
Current market sentiment is cautiously optimistic. On the one hand, the US dollar, supported by macroeconomic news and capital flows, continues to attract buying. On the other hand, the Canadian dollar appears to be on the back foot, lacking strong fundamental support. The market generally believes that the US dollar will maintain its upward bias ahead of this week's central bank decision.
However, traders are highly sensitive to technical resistance between 1.3780 and 1.38. If the exchange rate fails to break through, some positions may choose to take profits, leading to short-term volatility. From a psychological perspective, 1.38 is considered a watershed between bulls and bears. A break above it could trigger follow-on buying, while resistance could trigger a return of bearish sentiment.
Bullish analysts believe that if USD/CAD breaks through 1.3780 and stabilizes above 1.38, further upside potential is expected. Technical momentum, coupled with favorable fundamentals, will support continued gains, potentially targeting 1.3850 or even 1.39. If the Federal Reserve sends hawkish signals in its policy stance, the upward momentum will be further solidified.
Bearish analysts believe that if the exchange rate encounters resistance in the 1.3780-1.38 range and retreats, support will focus on the 1.3730 level. A break below this area will trigger a short-term correction, with a high probability of retesting the middle Bollinger band at 1.3672. If the JOLTS data falls short of expectations or the US dollar index retreats, the Canadian dollar may usher in a period of recovery.
Overall, analysts believe that the current trend remains bullish, but key resistance is approaching. Traders are closely watching for a breakout between 1.3780 and 1.38 to determine whether the short-term market can maintain momentum after four consecutive days of gains.
Fundamentals
The dollar's strength this week was primarily driven by positive developments in the trade arena. New tariff arrangements between the United States and the European Union eased market concerns about a potential escalation in global trade friction, supporting both safe-haven and fundamental demand for the dollar. Traders believe the recent tariff arrangements strike a balance between negotiating intensity and market tolerance, helping to extend the dollar's upward trend.
The US dollar index hit 99.00, a near one-month high, indicating strong buying demand for the US dollar. Meanwhile, recent Canadian economic data has been subdued, especially against the backdrop of volatile energy prices and slowing export growth, leaving the Canadian dollar lacking momentum. While the Bank of Canada is expected to maintain interest rates, the Canadian dollar appears relatively vulnerable against the backdrop of continued hawkish US monetary policy.
Of note, the June JOLTS job vacancies data for the US, due to be released this evening, is expected to show 7.55 million, down from 7.77 million in May. If the data beats expectations, it will further solidify the dollar's strength; if it falls short, it could put short-term downward pressure on the exchange rate. Overall, the market remains cautious ahead of the central bank's decision, with short-term capital flows still favoring the dollar.
Technical aspects:
The daily chart shows that USD/CAD has continued its recent rebound, once again approaching key resistance. Bollinger Bands indicate that the middle band is at 1.3672, and the exchange rate is currently trading near the upper band, indicating bullish technical momentum. The upper band at 1.3781 has become the primary resistance level; if broken, further upside targets would be 1.3850.
Regarding the MACD indicator, the DIFF line is at 0.0004, the DEA is at -0.0007, and the MACD histogram has turned red to 0.0023, indicating that short-term bullish momentum is accumulating. A golden cross has formed, and if the momentum continues, it will help the exchange rate to test the 1.38 mark.
The Relative Strength Index (RSI) is currently at 58.54, not yet in overbought territory, but significantly above its previous average, indicating increasing buying momentum. The upward trend in the RSI suggests continued short-term bullish momentum, but caution is warranted regarding potential pullbacks in the 60-65 range.
Overall, the exchange rate has been gradually rising recently, currently standing above 1.3750. Upward resistance is concentrated in the 1.3780-1.3850 range. A break above this area would further expand technical upside potential. Downward support is at 1.3730. A break below this level could lead to a return to the middle Bollinger band near 1.3672.
Market Sentiment Observation
Current market sentiment is cautiously optimistic. On the one hand, the US dollar, supported by macroeconomic news and capital flows, continues to attract buying. On the other hand, the Canadian dollar appears to be on the back foot, lacking strong fundamental support. The market generally believes that the US dollar will maintain its upward bias ahead of this week's central bank decision.
However, traders are highly sensitive to technical resistance between 1.3780 and 1.38. If the exchange rate fails to break through, some positions may choose to take profits, leading to short-term volatility. From a psychological perspective, 1.38 is considered a watershed between bulls and bears. A break above it could trigger follow-on buying, while resistance could trigger a return of bearish sentiment.
Outlook
Bullish analysts believe that if USD/CAD breaks through 1.3780 and stabilizes above 1.38, further upside potential is expected. Technical momentum, coupled with favorable fundamentals, will support continued gains, potentially targeting 1.3850 or even 1.39. If the Federal Reserve sends hawkish signals in its policy stance, the upward momentum will be further solidified.
Bearish analysts believe that if the exchange rate encounters resistance in the 1.3780-1.38 range and retreats, support will focus on the 1.3730 level. A break below this area will trigger a short-term correction, with a high probability of retesting the middle Bollinger band at 1.3672. If the JOLTS data falls short of expectations or the US dollar index retreats, the Canadian dollar may usher in a period of recovery.
Overall, analysts believe that the current trend remains bullish, but key resistance is approaching. Traders are closely watching for a breakout between 1.3780 and 1.38 to determine whether the short-term market can maintain momentum after four consecutive days of gains.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
