USD/CAD Forecast: 1.3790 Breaks Below the 1.3835 Average
- USD/CAD trades at 1.3790, flat on the day but sharply lower on the week after failing at 1.3945.
- The Bank of Canada held at 2.25% on 2 September and a strong second-quarter GDP print has taken the pressure off the loonie.
- The 1.3835 average is now resistance; 1.3770 is the level that decides whether the slide extends.
Fundamental Analysis: USD/CAD
The Canadian dollar has earned this move. The Bank of Canada left its overnight rate at 2.25% on 2 September, noting that an uncertain outlook prevents clear signals on policy for the rest of the year — a hold, but not a dovish one. It flagged upside inflation risks from geopolitical tensions and tariffs while pointing out that underlying inflation has stayed stable despite the energy shock.
The data underneath is doing the rest. Canadian real GDP expanded 0.8% in the second quarter, led by exports, household spending and business investment. Exports rose 3.6%, the largest quarterly increase since the first quarter of 2023, with passenger car and light truck shipments up 27% as production recovered. Per capita output rose 1.0%. For a currency that spent much of the past two years priced for stagnation, that is a meaningful revision to the story.
Crude is the third leg and currently the strongest. WTI near $91.50 with Gulf export flows constrained and OPEC+ holding October policy steady is a direct transfer to Canada's terms of trade. Against that, the US side remains hawkish — five straight holds, three July dissents in favour of a hike, and roughly two-thirds odds priced for a September increase — which is why this is a controlled decline rather than a rout. The balance favours the loonie while oil holds above $90, and reverses quickly if it does not.
Technical Analysis: USD/CAD
The 4-hour chart shows a failed breakout. Price spiked to 1.3945 and was rejected inside a single candle, then fell through the entire moving average band in a straight line to 1.3770. All four averages now sit above spot in bearish order — 1.3835, 1.3852, 1.3875 and 1.3922 — and price has spent the last several bars consolidating beneath them rather than recovering.
Resistance is 1.3835 at the fastest average, then 1.3852, with the 1.3900 handle above that. Support is the 1.3770 swing low, then 1.3750. A sustained 4-hour close back above 1.3875 would put the failed breakout back in doubt and invalidate the bearish read.
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