Technical Signals Suggest a Bearish Retracement Ahead

Central Bank

Economic

Summary:

This suggests that sellers could attempt to regain control of the market, while buyers may begin taking profits following the extended bullish advance.

SELL USDCAD

EXP

TRADING

1.42228

Entry Price

1.40220

1.43500

1.42390 +0.00181 +0.13%

0.0

Pips

Flat

1.40220

Exit Price

1.42228

Entry Price

1.43500

On Wednesday, the Federal Reserve’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, came in at 3.4% year-over-year, unchanged from the previous reading and below expectations for a rise to 3.5%.

Following the report, money markets shifted their expectations considerably. Traders now assign nearly a 70% probability that interest rates will remain unchanged at the next meeting, while the chances of a rate increase in December currently stand at 61.3%.

The yield on the US 10-year Treasury note, a key benchmark for global borrowing costs and asset valuations, declined to 5.24% after surging earlier in the session to 5.34%, marking a new multi-decade high. Likewise, the yield on the 30-year Treasury bond climbed to levels not seen in 24 years before easing slightly toward the end of the trading day.

Dallas Federal Reserve President Lorie Logan stated on Thursday that the central bank may need to raise short-term borrowing costs by at least another half percentage point in order to bring monetary policy into what she described as a “moderately restrictive” stance and guide inflation back toward its target.

Market attention now turns to Friday’s US September employment report. Economists expect Nonfarm Payrolls to show an increase of 90,000 jobs, compared with the previous reading of 162,000. Meanwhile, the unemployment rate is projected to remain unchanged at 4.1% over the same period.

Recently, Bank of Canada Governor Tiff Macklem stated that inflation is expected to “rise slightly over the coming months” and noted that what he described as a “new era of uncertainty” is unlikely to disappear anytime soon during remarks delivered in Halifax.

Regarding interest rates, Macklem explained that the current debate centers on whether policymakers should maintain rates at current levels or move them higher. He also argued that if the Bank of Canada tightens policy too slowly, it may eventually be forced to act more aggressively and implement a larger amount of tightening than would have been necessary had action been taken earlier.

The Bank of Canada left its benchmark interest rate unchanged at 2.25% during its September policy meeting, a decision that was widely anticipated by financial markets. However, policymakers acknowledged that inflation risks have increased, while newly introduced tariffs have added another layer of uncertainty to the economic outlook. Market participants currently assign nearly a 60% probability to a rate increase at the Bank of Canada’s next policy meeting scheduled for October 28. Technical Signals Suggest a Bearish Retracement Ahead_1

Technical Signals Suggest a Bearish Retracement Ahead_1

Technical Analysis

USDCAD recently reached the resistance area located at 1.4249, a level last tested on June 29. On that occasion, the pair reacted lower and eventually declined toward the local low at 1.3732 recorded on August 20. As a result, the current downside reaction could drive the pair toward the local support level at 1.4022, an area that closely aligns with the 50% Fibonacci retracement level located at 1.4010.

In addition, the 100-period and 200-period moving averages are positioned near this zone at 1.3938 and 1.4000 respectively, increasing the relevance of this support region and strengthening the case for a corrective move toward these levels.

From an oscillator perspective, the RSI recently reached 84, moving deep into overbought territory. This suggests that sellers could attempt to regain control of the market, while buyers may begin taking profits following the extended bullish advance. At the same time, the MACD histogram has recently crossed into negative territory, signaling the start of downside momentum. However, the signal lines remain firmly positioned within bullish territory, indicating that the current decline is still considered a correction within the broader upward trend.

Trading Recommendations

Trading direction: Sell

Entry price: 1.4222

Target price: 1.4022

Stop loss: 1.4350

Validity: Oct 15, 2026 15:00:00

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Technical Signals Suggest a Bearish Retracement Ahead

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