Technical Breakout Could Reinforce the Uptrend

Summary:

This trendline is closely aligned with the support area around 1.3873, making that region particularly relevant from a technical perspective.

Buy USDCAD

EXP

PENDING

1.38730

ENTRY

1.40000

TGT

1.37800

1.39942 +0.00055 +0.04%

Point

PENDING

1.37800

CLOSING

1.38730

ENTRY

1.40000

TGT

Friday’s U.S. Consumer Price Index (CPI) report largely reinforced expectations for a quarter-point interest rate increase at this week’s Federal Reserve meeting. Data published by the U.S. Bureau of Labor Statistics showed that headline CPI rose by 0.4% month-over-month in August, accelerating from the 0.1% increase recorded in July. Core CPI also moved higher, advancing 0.3% during the same period compared with 0.2% previously, marking its strongest monthly pace in four months.

At the same time, the yield on the benchmark 10-year U.S. Treasury note climbed above the 5% threshold on Monday for the first time since 2023, rising more than four basis points as investors increasingly priced in a 25-basis-point rate increase from the Federal Reserve at Wednesday’s policy announcement.

The U.S. Dollar Index (DXY), which measures the value of the dollar against a basket of six major currencies, traded around 99.53, gaining approximately 0.55% on the day and reaching its highest level since September 3.

Rising oil prices are also strengthening expectations of a hawkish outcome from the Federal Reserve as geopolitical tensions in the Middle East continue to intensify. Supply concerns have expanded beyond the Strait of Hormuz and increasingly involve the Red Sea, where Iran-aligned Houthi forces have increased their activity near the strategically important Bab el-Mandeb shipping corridor. West Texas Intermediate (WTI) crude traded near $99.00 per barrel, close to levels last seen on May 21, and has advanced more than 15% since the beginning of the month.

In Canada, annual inflation remained unchanged at 3.0% in August, keeping price pressures above the Bank of Canada’s 2% target. However, the data did not provide convincing evidence of a broad-based acceleration in inflation that would require an immediate policy response. Economists noted that relatively stable energy prices and moderating food costs helped contain inflationary pressures, while services inflation remains an area of close attention.

The latest inflation figures leave the Bank of Canada facing a delicate balance between persistent inflationary pressures, higher oil prices, and the risk that U.S. tariffs could weigh on economic activity in the months ahead.

Previously, the Bank of Canada (BoC) left its benchmark interest rate unchanged at 2.25%, a decision that was fully anticipated by financial markets. Nevertheless, policymakers adopted a more cautious tone, emphasizing that inflation risks have shifted to the upside and that assessing the strength of the economic recovery has become increasingly challenging.

BoC Governor Tiff Macklem stated that multiple rate increases could become necessary if inflation remains persistently elevated. At the same time, he stressed that future policy decisions will remain dependent on how inflation and related risks evolve. Senior Deputy Governor Carolyn Rogers echoed this view, noting that monetary policy cannot be guided by a single economic report or isolated risk, but must instead be based on a broader evaluation of economic conditions. Technical Breakout Could Reinforce the Uptrend_1

Technical Breakout Could Reinforce the Uptrend_1

Technical Analysis

USDCAD recently broke above a descending trendline on the 12-hour chart, a development that could open the door for a continuation of the upward move toward the next resistance level at 1.4005. The breakout represents a notable shift in market structure after an extended period of downside pressure and suggests that buyers may be beginning to regain control of the broader trend.

For now, price has encountered moderate resistance around the 200-period moving average, currently located at 1.3934, while the 100-period moving average is approaching from above near 1.3960. Following the breakout, it would not be unusual to see a retest of the recently broken trendline before the next directional move develops. This trendline is closely aligned with the support area around 1.3873, making that region particularly relevant from a technical perspective. As long as support remains intact, this area could provide opportunities to rejoin the emerging bullish trend.

Looking at momentum indicators, the Relative Strength Index (RSI) is currently positioned near 59, firmly within bullish territory but still comfortably below overbought levels. This suggests that the pair retains sufficient room to continue advancing without immediately facing exhaustion signals.

Meanwhile, the MACD continues to display a bullish histogram that is gradually gaining depth, indicating strengthening upside momentum. In addition, the signal lines are approaching a crossover into bullish territory, further supporting the constructive outlook. Taken together, these technical factors continue to build a case for a potential extension of the upward move in the sessions ahead.

Trading Recommendations

Trading direction: Buy

Entry price: 1.3873

Target price: 1.4000

Stop loss: 1.3780

Validity: Sep 25, 2026 15:00:00

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