A Bullish Breakout Could Pave the Way for an Extended Upside Rally

Forex

Economic

Summary:

If the histogram regains structural depth while the signal lines maintain their positive trajectory, we could witness a sustained and powerful breakout that validates the broader bullish thesis.

BUY USDCAD

EXP

PENDING

1.36530

Entry Price

1.39200

1.35500

1.36919 +0.00036 +0.03%

Pips

PENDING

1.35500

Exit Price

1.36530

Entry Price

1.39200

U.S. President Donald Trump has issued a formal call for international cooperation to secure the Strait of Hormuz, urging nations that are heavily dependent on this maritime corridor to bolster American security efforts. Despite this appeal, international backing remains notably fragmented. Japan’s Defense Minister has stated that Tokyo currently has no intentions of deploying naval assets, while U.S. and UK relations remain nuanced; UK Prime Minister Keir Starmer emphasized that Britain "will not be dragged into a broader regional war." Similarly, Spanish Foreign Minister José Manuel Albares cautioned against any actions that might "further exacerbate tensions or lead to an unintended escalation."

Adding to the complexity, Arsenio Domínguez, Secretary-General of the International Maritime Organization (IMO), remarked that naval escorts through the Strait do not provide a "100 percent guarantee" of safety for commercial vessels transiting this vital global chokepoint. This persistent uncertainty continues to provide a volatile backdrop for the energy complex and global risk sentiment.

On the domestic front, recent macroeconomic data continues to reflect moderate growth in U.S. industrial activity. Industrial production rose by 0.2% month-over-month in February. While this represents a deceleration from the robust 0.7% surge recorded in January, it slightly outperformed the market consensus of 0.1%. Simultaneously, capacity utilization was reported at 76.3%, matching the previous month’s revised figures and marginally exceeding analyst estimates of 76.2%.

These resilient figures have prompted investors to aggressively recalibrate their expectations for Federal Reserve policy. According to the CME FedWatch Tool, the probability of a 25-basis point rate cut in June has collapsed to 23.6%, down from over 51% just one month ago. Consequently, financial markets are now pricing in a solitary rate reduction by year-end—a significant hawkish shift from the two cuts previously anticipated by the street.

In Canada, the most recent CPI report suggests that inflation remained relatively contained prior to the recent surge in crude oil prices. Both headline and core inflation figures continue to hover below the 2.0% threshold, while housing costs have begun to show welcome signs of deceleration. Although projections suggest that headline inflation may gravitate toward 3.0% as rising energy costs permeate the economy, core inflation appears comparatively stable. This stability provides the Bank of Canada (BoC) with essential maneuverability in its policy deliberations.

However, the disappointing employment data released last week has heightened the probability that the central bank may reconsider its current stance if labor market deterioration persists. Against this backdrop, market participants are focusing on Wednesday’s upcoming policy decision, where the consensus expectation is for the benchmark rate to remain unchanged at 2.25%. A Bullish Breakout Could Pave the Way for an Extended Upside Rally_1

A Bullish Breakout Could Pave the Way for an Extended Upside Rally_1

Technical Analysis

From a technical perspective, USD/CAD is currently navigating a bullish impulse that has reached a definitive crossroads. The pair is testing a major resistance zone defined by a descending trendline that aligns with the 200-period Moving Average (MA), currently situated at 1.3807. This dynamic average has functioned as a ceiling, capping several recent upside attempts.

A decisive breakout and sustained close above this 1.3807 handle would constitute a valid structural shift, potentially clearing the path for a move toward the 1.3922 level—a peak not seen since January 16. Conversely, the 100-period MA at 1.3750 remains a critical floor, offering dynamic support should the pair experience a localized rejection.

Our analysis of momentum oscillators reinforces the case for an impending move. The RSI is currently hovering at the 58 level, sitting comfortably above technical neutrality and suggesting that the pair maintains sufficient "runway" for further upward expansion. Simultaneously, the MACD is printing a bullish histogram, although the bars have shown signs of temporary contraction.

The signal lines have successfully executed a bullish crossover above the neutral threshold. If the histogram regains structural depth while the signal lines maintain their positive trajectory, we could witness a sustained and powerful breakout that validates the broader bullish thesis.

Trading Recommendations

Trading direction: Buy

Entry price: 1.3653

Target price: 1.3920

Stop loss: 1.3550

Validity: Mar 27, 2026 15:00:00

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A Bullish Breakout Could Pave the Way for an Extended Upside Rally

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