Downtrend Remains in Control and Could Extend to Next Major Support

Manuel

Forex

Economic

Summary:

The 200-period moving average aligns with a resistance level, and the trendline was rejected to the downside once more.

SELL USDCAD

EXP

PENDING

1.40250

Entry Price

1.39000

1.41500

1.40049 -0.00047 -0.03%

Pips

PENDING

1.39000

Exit Price

1.40250

Entry Price

1.41500

U.S. labor market data showed fresh signs of moderation in July. The ADP report revealed the creation of 44,000 private sector jobs, coming in below expectations of 70,000 as well as the 98,000 positions recorded in June. This release adds to the JOLTS job openings figures, which also surprised to the downside earlier in the week, heightening investor focus on Friday's Non-Farm Payrolls (NFP) report.

On the other hand, service sector activity maintained a solid pace, though slightly weaker than expected. The ISM Services PMI rose to 54.1 points in July from 54.0 in June, missing market expectations of 54.5.

This cluster of data has led markets to temper expectations for further monetary tightening by the Federal Reserve. According to the CME Group's FedWatch tool, the probability of a rate hike in September fell to 58%, down from 67% on Tuesday, trimming some of the U.S. dollar's recent support.

On the geopolitical front, President Donald Trump stated that talks held with Iran on Tuesday were "very positive" and expressed confidence that the Strait of Hormuz could reopen in the short term. Along the same line, several reports indicated that the United States, Iran, and Oman may be close to reaching a provisional agreement that would temporarily restore maritime transit through this strategic route, helping ease concerns over global energy supply.

In Canada, minutes from the Bank of Canada's (BoC) July meeting reflected a balanced stance from monetary authorities. Policymakers consider that the economy continues to adapt to recent external shocks and maintain expectations for a gradual improvement in growth. However, they also expressed concern over the risk that medium-term inflation expectations could begin to tick higher.

Deliberations highlighted the presence of upside risks to inflation and downside risks to economic activity. Key sources of uncertainty include the trajectory of oil prices and trade tensions with the United States. Furthermore, the BoC acknowledged that the recent pickup in growth might prove transitory, noting that the possibility of new U.S. tariffs continues to represent a persistent risk to the country's economic outlook. Downtrend Remains in Control and Could Extend to Next Major Support_1

Downtrend Remains in Control and Could Extend to Next Major Support_1

Technical Analysis

USDCAD remains in a downtrend, recently reacting lower once again upon reaching the 100-period moving average sitting at 1.4191, while the 200-period moving average lies at 1.4063. The 200-period moving average aligns with a resistance level, and the trendline was rejected to the downside once more. As a result, we could see a fresh leg lower toward the 1.3900 level, an area housing the next major support level.

Looking at the oscillators, the RSI failed to cross above the 66 level reached on July 21 and currently sits at 36. It still has room to continue lower as it displays no signs of divergence, meaning a lower low could emerge from this move. Meanwhile, the MACD histogram has just flipped into negative territory; if it starts gaining depth, downward momentum could accelerate. The signal lines pushed up toward the neutral zone before turning back down, leaving all MACD indicators pointing toward a downside breakdown.

Trading Recommendations

Trading direction: Sell

Entry price: 1.4025

Target price: 1.3900

Stop loss: 1.4150

Validity: Aug 18, 2026 15:00:00

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Downtrend Remains in Control and Could Extend to Next Major Support

Technical Analysis

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