USD/CAD: One Trendline Away From Deciding the Next Move

After several strongly positive weeks, USD/CAD has stalled over the past few sessions, entering a phase of uncertainty.

On the dollar side, Fed Chair Kevin Warsh has struck a firm tone, reaffirming the 2% inflation target and pushing back against political pressure to cut rates, while sticky PCE inflation near 4% keeps hike odds alive for September. Yet June payrolls came in softer and speculative USD positioning looks stretched, raising doubts on how much further the rally can extend. Markets will also watch upcoming US CPI and PPI releases closely, as either gauge could reinforce the Fed hike case or, if softer, cap dollar strength.

The loonie's story is similarly mixed. Canada's June jobs report beat expectations, reducing the odds of a BoC cut, yet the currency remains capped by falling oil prices, subdued inflation, and unresolved CUSMA trade uncertainty. Two currencies face both genuine support and headwinds, leaving USD/CAD hostage to this week's BoC decision and incoming US data—a backdrop that aligns well with what the chart itself is showing.

USD/CAD Technical analysis

As the 4H chart shows, USD/CAD has traded within a well-defined ascending channel since May's lows, and is now consolidating just below recent swing highs. The Fibonacci retracement drawn from that low to the July high offers a useful reference for the levels ahead.

Bullish Scenario

As long as price holds above the ascending trendline and defends the former resistance, now turned support, in the 1.4100 area, the broader uptrend structure remains firmly intact, and this pause looks far more like healthy consolidation than an early reversal signal. A confirmed bounce off the trendline, followed by a decisive push back above the recent swing high near the 1.4250 area, would validate continued bullish control and open the way for USD/CAD to extend its rally into fresh highs for the move, keeping the dollar's medium-term strength against the loonie firmly in place.

Bearish Scenario

A clean, sustained break below the ascending trendline would mark the first real technical warning sign, shifting near-term momentum decisively lower. In that case, the 0.382 and 0.5 Fibonacci retracement levels would become the first meaningful support tests, coinciding with the psychological 1.3900-1.4000 range. Losing these levels could expose a deeper slide towards the 0.618 retracement—an area that would confirm a genuine correction of the entire May-to-July rally rather than a simple pullback, and would put the pair's medium-term bullish structure into serious question.

With price sitting right on the ascending trendline, the coming sessions could prove decisive in determining where USD/CAD heads next.

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