USD/CAD Breaks Out, Eyes Further Upside Amid Strong Dollar Momentum

Market Overview

The U.S. dollar surged on Thursday, climbing to its highest level in a year against major peers and on track for its fifth consecutive daily gain. This strength was driven by rising Treasury yields and optimism following Donald Trump’s election victory. The dollar also broke above the key psychological barrier of 156 yen for the first time since July, while the euro slumped to its lowest point since November 2023, trading at 1.0546. Sterling faced similar pressure, reaching its weakest rate against the dollar in three months. Markets anticipate that Trump’s economic agenda—featuring higher tariffs and tighter immigration policies—could boost inflation and slow the Fed’s rate-cutting cycle over the longer term. Expectations of increased deficit spending are also pushing Treasury yields higher, providing additional support for the greenback.

Technical Analysis

In the daily timeframe, USD/CAD has confirmed a bullish breakout from a long-term symmetrical triangle, surpassing its previous highs. This breakout led to a test of a key resistance level at 1.39964 (127.20% Fibonacci extension). Should the pair clear this significant barrier, further gains could materialize, targeting Fibonacci extensions at 1.40448 (161.80%), 1.40982 (200.00%), and ultimately 1.41561 (241.40%). These levels will be critical for assessing whether buying momentum can sustain its current pace.

Oscillators and Moving Averages Aligning Bullishly

Technical indicators are aligning with the broader bullish picture. The RSI is at 65.23, indicating positive momentum and strong buying interest. Similarly, the MACD is positioned comfortably in positive territory and has crossed above the signal line, reaffirming increasing upside momentum. Moving averages also underscore the bullish scenario, with the shorter-term Weighted Moving Average (WMA) at 1.38726 now above the longer-term WMA at 1.37224. Both averages are sloping upwards, which reinforces the ongoing uptrend.

Alternative Scenario

In the event that USD/CAD fails to break above 1.39964 and starts retracing, downside attention will focus on the immediate support at 1.39050 (61.80% Fibonacci retracement). Should this support level break, further declines could target 1.38186 (0% Fibonacci retracement), signaling a potential pause in the current bullish momentum and indicating a deeper corrective phase.

Key Technical Levels Overview

Resistance Levels:

• Resistance 1: 1.39964
• Resistance 2: 1.40448
• Resistance 3: 1.40982
• Resistance 4: 1.41561

Current Price: 1.39938

Support Levels:

• Support 1: 1.39584
• Support 2: 1.39050
• Support 3: 1.38186

Key Events to Watch

The U.S. economic calendar for Thursday is loaded with significant reports that may further impact USD/CAD. Key releases include the monthly Energy Information Administration (EIA) report, the weekly jobless claims figures, changes in U.S. crude oil inventories, and the Producer Price Index (PPI) data. Traders should closely watch these releases, as they will be instrumental in determining near-term direction.

Conclusion

USD/CAD remains positioned for further gains, contingent on a successful breakout above 1.39964. Should this level be cleared, buyers could extend the rally, whereas a reversal would indicate potential short-term corrective action.