Uptrend Could Extend with a Breakout Above the Descending Trendline

Summary:

The MACD shows a bullish histogram that is beginning to gain depth again as the signal lines cross into positive territory,

Buy USDCAD

EXP

PENDING

1.38500

ENTRY

1.40000

TGT

1.37800

1.39128 +0.00181 +0.13%

Point

PENDING

1.37800

CLOSING

1.38500

ENTRY

1.40000

TGT

The Canadian economy accelerated substantially during the second quarter of the year. Data released by Statistics Canada indicates that Gross Domestic Product (GDP) expanded by 0.8% quarter-over-quarter, comfortably outpacing the 0.1% growth recorded in the first quarter, which was itself revised upward from an initial reading of 0%.

On an annualized basis, Canada's economy grew by 3.3% in the second quarter, building on the revised 0.3% advance from the prior period. Although the reading fell marginally short of the 3.4% market consensus, it underscored a marked pickup in overall economic momentum.

Cross-border trade disputes between Canada and the United States continue to escalate. Last week, U.S. President Donald Trump announced 50% tariffs across several Canadian product lines, with the duties taking effect on Saturday after bilateral trade negotiations collapsed.

In response, Canadian Prime Minister Mark Carney confirmed that Ottawa will launch retaliatory tariffs beginning September 8. Canada subsequently outlined tariffs on U.S. goods valued at roughly CAD 27.6 billion, with rates spanning between 15% and 50% across approximately 700 products, raising concerns over a broader trade escalation between the two partners.

Meanwhile, U.S. Treasury Secretary Scott Bessent noted on Tuesday that Japan is enacting suitable measures to bolster its domestic economy, adding that G20 finance ministers remain aligned on the goal of supporting global economic growth.

However, Bessent cautioned that uncertainty persists regarding whether G20 member countries will take the required steps to deliver that growth. He also highlighted the importance of safeguarding domestic manufacturing and employment against surging exports from China, reflecting broader concerns among advanced economies regarding industrial competitiveness.

In geopolitical developments, explosions occurred in southern Iran, with U.S. President Donald Trump confirming that U.S. Air Force strikes were executed to diminish Tehran's ability to operationalize missiles and lay naval mines in the Strait of Hormuz. Trump added that the strategic maritime corridor is "currently mine-free," stating that sea mines were successfully cleared or destroyed.

Regarding monetary policy, markets remain focused on statements from Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium. Warsh reiterated that if inflation remains stubborn, the Federal Reserve still has "work to do," solidifying expectations that interest rates will stay higher for longer.

These remarks triggered a notable repricing across financial markets. Ahead of the symposium, the implied probability of a rate hike at the September policy meeting was below 40%. The CME FedWatch tool now reflects roughly a 68% likelihood of a rate increase at the upcoming September 16 decision.

This hawkish repricing pushed U.S. Treasury yields higher across the curve. The benchmark 10-year Treasury yield rose to around 4.79%, up roughly four basis points on the session to reach its highest level since January 2025 across five consecutive days of bond selling. Concurrently, the 2-year yield gained nearly five basis points to trade near 4.39%. Uptrend Could Extend with a Breakout Above the Descending Trendline_1

Uptrend Could Extend with a Breakout Above the Descending Trendline_1

Technical Analysis

USDCAD has bounced higher following a sharp downside decline that hit a local low of 1.3735 on August 20. From that level, price action has begun constructing an upward recovery that could test the prevailing descending trendline. A decisive breakout above this trendline could extend the bullish momentum toward the next key resistance zone at 1.4005. This target sits near the 100-period and 200-period moving averages—positioned at 1.3959 and 1.4023, respectively—which also aligns with the 0.50 Fibonacci retracement level, reinforcing the probability that the pullback could extend into this area.

Looking at the technical indicators, the RSI sits at 56, holding above the neutral threshold with a clear bullish bias and ample space remaining before reaching overbought territory, keeping the upside scenario active. Meanwhile, the MACD shows a bullish histogram that is beginning to gain depth again as the signal lines cross into positive territory, indicating that the path of least resistance remains to the upside.

Trading Recommendations

Trading direction: Buy

Entry price: 1.3850

Target price: 1.4000

Stop loss: 1.3780

Validity: Sep 15, 2026 15:00:00

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