USD/CAD price trades near $1.418 as falling wedge pattern signals potential breakout
USD/CAD tests key support near 1.41 as falling wedge suggests potential rebound
The USD/CAD pair trades around 1.418 on Wednesday, consolidating recent losses within a falling wedge pattern—a bullish formation that suggests a potential breakout in the near term. The pair has struggled to gain traction as short-term technical indicators remain bearish, but key support and resistance levels will determine the next price movement.
If USD/CAD holds above 1.41 and breaks 1.423, a bullish move toward 1.43 is likely. Conversely, a drop below 1.41 could push the pair to fresh multi-month lows. Traders will watch for further clues from U.S. economic data and Canadian monetary policy statements to gauge the next direction.
USD/CAD price analysis (Dec 2024 - Feb 2025) Source: TradingView.
Technical outlook: Falling wedge signals possible recovery
USD/CAD remains below the nine-day EMA at 1.4230, reinforcing a bearish trend in the short term. However, the falling wedge pattern indicates that a breakout to the upside is likely if the pair manages to clear the resistance zone near 1.4230. Further resistance is found at 1.4263 (14-day EMA), while a breakout beyond 1.43 could confirm a bullish shift.
On the downside, support is seen near 1.41, aligning with the lower boundary of the falling wedge. A drop below this level could extend selling pressure toward the three-month low of 1.3927, last reached in late November.
The Relative Strength Index (RSI) remains above 30, preventing an oversold condition but keeping the bearish bias intact. If RSI dips below 30, an upward correction could be triggered, reinforcing the wedge breakout scenario.
The Canadian dollar has strengthened in recent weeks, supported by stable energy prices and a less dovish stance from the Bank of Canada (BoC). However, the Federal Reserve's hawkish tone and expectations of delayed U.S. interest rate cuts continue to support the USD, limiting CAD gains.
Last week, USD/CAD was testing support near 1.4150, with the falling wedge pattern indicating potential upside momentum. The price action remains aligned with this forecast, as a breakout above 1.4230 could confirm a trend reversal.
