Can USD/CAD hold support as global bond yields remain elevated?

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Dollar vs Canadian Dollar down 0.56% today

Highlights

Global bond yields have climbed to multi-year highs, reducing risk appetite and weakening demand for the Canadian Dollar.
Capital flows have favored the US Dollar over the Canadian Dollar, sustaining downward pressure on the CAD.
USD/CAD trades near C$1.3839 with strong bearish technical momentum, an expected range of C$1.377 to C$1.3908, and a high probability of further downside.

Risk aversion weighs on Canadian dollar amid global yield surge

Global bond yields have reached multi-year highs, resulting in a deterioration of risk appetite and driving capital flows away from risk-sensitive currencies such as the Canadian Dollar, according to Tradingpedia. The shift in market sentiment has created persistent headwinds for the CAD, particularly as investors seek safety in the US Dollar. This dynamic has accompanied the recent weakness observed in the Dollar vs Canadian Dollar pair.

Oversold momentum persists as resistance caps recovery attempts

The pair currently trades below the MA-20 (C$1.3901) and MA-50 (C$1.3885), while holding just above the MA-200 (C$1.3835), which is acting as long-term support. The Ichimoku Kijun at C$1.3889 presents immediate resistance for any recovery attempts. Technical indicators paint a negative picture: MACD and ADX are both in Sell mode, while RSI, Stoch RSI, and CCI are in deeply oversold territory, reinforcing ongoing selling momentum. Bull/Bear Power maintains seller dominance intraday, and the Awesome Oscillator also confirms a downside bias.

Downside risks dominate as consolidation expected below resistance

In the short term, the expected trading range for USD/CAD is C$1.377 to C$1.3908. The probability of a sustained upward move is considered very low, while the likelihood of additional downside remains elevated. Under a baseline scenario, the pair is likely to consolidate within this corridor. A bullish scenario would require a clear break above immediate resistance at the Kijun level, while a decisive move below C$1.377 could open the door to accelerated losses.

Viktoras Karapetjanc, analyst at Traders Union, sees the USD/CAD pair holding above its long-term support as global bond yields spur flight to the US Dollar. He notes that risk aversion and negative momentum keep selling pressure on the Canadian Dollar. Technical conditions remain weak, but macro sentiment could stabilize if global yields peak. He believes consolidation is likely for now, with further downside only if support breaks. "If C$1.377 holds, I expect a period of sideways action, but any clear break below may accelerate the decline," he says.

Earlier, analysts noted that the outlook for USD/CAD was complicated by trade tensions and persistent downside risk, with the potential for further upside if resistance levels were breached. The latest developments bolster the cautious bias, with current technicals and deteriorating risk appetite suggesting that traders should closely monitor the long-term support at C$1.3835 for signs of a deeper move lower.

Source of Data: USD Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.