Bearish Opportunities Emerge as Price Secures Breakout Below Support

Manuel

Economic

Central Bank

Summary:

This support breakdown is accompanied by a close below the 100-period moving average located at 1.4153.

SELL USDCAD

EXP

TRADING

1.41681

Entry Price

1.39660

1.42600

1.41521 -0.00148 -0.10%

0.0

Pips

Flat

1.39660

Exit Price

1.41681

Entry Price

1.42600

The escalation of tensions between the United States and Iran dominated market attention over recent days after both sides exchanged military strikes, putting at risk diplomatic efforts that had contemplated the resumption of negotiations in Pakistan before the recent deterioration of the situation. The intensification of the conflict has increased geopolitical uncertainty and returned the energy market to the center of investor concerns.

Consequently, energy prices recorded a sharp rebound, fueling expectations that the Federal Reserve (Fed) could be forced to maintain a restrictive monetary stance for longer to prevent new inflationary pressures. This concern takes on particular relevance considering that U.S. inflation stood at 4.2% year-on-year in May, remaining well above the central bank's target.

Looking ahead to next week, market participants' attention will be focused on the release of consumer and producer inflation data in the United States, as well as the testimony of Fed Chair Kevin Warsh before Congress. Both events could offer important signals regarding the future trajectory of U.S. monetary policy.

In this context, the Federal Reserve's most recent minutes reflected an institution leaning slightly more toward a hawkish stance. Although most policymakers identified arguments that would justify an additional interest rate hike, they ultimately chose to keep the cost of credit unchanged while they evaluate the evolution of economic activity and inflationary pressures.

In the same vein, New York Federal Reserve President John Williams reiterated that inflation remains too high and highlighted the importance of monitoring energy price developments due to their capacity to pass through to the rest of the economy. Furthermore, he reaffirmed the institution's commitment to the 2% inflation target and underscored that future decisions will continue to depend on the available economic data.

However, outlooks for a more restrictive monetary policy were partially moderated following the release of a weaker-than-expected labor report. Non-Farm Payrolls (NFP) data showed that the U.S. economy generated 57,000 jobs in June, a figure significantly below the 110,000 positions anticipated by market consensus. This result has led investors to reassess the probability of further rate hikes in the coming months.

In Canada, the economic outlook continues to show mixed signals. The gradual moderation of inflationary pressures, coupled with the recent weakness observed in gold and oil prices, has limited some of the traditional support that the Canadian dollar receives. Added to this is the persistent uncertainty over the future of the Canada-United States-Mexico Agreement (CUSMA), a factor that continues to weigh on the country's trade and investment outlook.

Nonetheless, a growth-oriented economic strategy and greater clarity in regional trade relations could favor a more sustained appreciation of the Canadian dollar over the medium term.

Regarding monetary policy, market consensus continues to indicate that the Bank of Canada will keep interest rates unchanged for the remainder of the year. However, the entity continues to adopt a flexible stance, leaving open the possibility of implementing cuts in the future if inflation maintains its downward trajectory and economic conditions so warrant. Bearish Opportunities Emerge as Price Secures Breakout Below Support_1

Bearish Opportunities Emerge as Price Secures Breakout Below Support_1

Technical Analysis

USDCAD is currently locked in a corrective move downward that could extend toward the 1.3966 support zone, as it is currently attempting to consolidate its breakout below the 1.4178 support level. This support breakdown is accompanied by a close below the 100-period moving average located at 1.4153. If this close holds solidly, we could see a new bearish leg develop, which would find dynamic support at the 200-period moving average sitting a bit lower at 1.4009.

Looking at the oscillators, the RSI is hovering at the 43 level, slightly below neutral territory, indicating that the price retains bearish potential. Meanwhile, the MACD shows a bearish histogram that has not yet gathered much depth, but with the signal lines already trading below the neutral line. Consequently, the bearish path appears to be the path of least resistance for now. Conversely, if the price recovers and pushes back above 1.4240, it could open the door for further gains, and this bearish setup would be invalidated.

Trading Recommendations

Trading direction: Sell

Entry price: 1.4168

Target price: 1.3966

Stop loss: 1.4260

Validity: Jul 22, 2026 15:00:00

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Bearish Opportunities Emerge as Price Secures Breakout Below Support

Technical Analysis

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