WHY USDCAD IS DROPPING ?? DETAILED ANALYSISUSDCAD is currently reacting from a strong daily supply zone after a sustained upside move, and we are now seeing clear signs of bearish structure forming. Price has broken through multiple short-term supports and is now trading around the 1.38600 level, sitting right above a key demand zone that held in late 2023. Given the aggressive sell-off and rejection from the 1.43400–1.44500 resistance range, the market appears to be preparing for a deeper retracement. My bearish target is 1.34600, which aligns with the previous major demand level and psychological support.
Technically, the chart shows two strong bearish engulfing moves from supply, followed by lower highs and lower lows. This shift in structure combined with repeated rejections from resistance zones indicates the momentum is shifting in favor of sellers. If the current zone fails to hold on the retest bounce, we could see a strong continuation leg down. I expect a minor correction toward 1.41600 before further downside resumes, offering an ideal risk-reward short setup for swing traders.
From a fundamental perspective, the Canadian Dollar remains firm, supported by strong crude oil prices as WTI holds above $85 amid geopolitical tensions and production cuts. At the same time, recent U.S. data has shown mixed signals, with sticky inflation keeping the Fed cautious, but slowing job growth and consumer spending raising concerns. If oil prices remain elevated and Fed rate cut expectations increase later this quarter, the USDCAD pair is likely to stay under pressure.
With CAD strength driven by energy markets and the USD facing headwinds from softening macro indicators, this setup aligns both technically and fundamentally for a bearish continuation. I’ll be watching for clean rejections from the 1.40000–1.41600 resistance zone before loading more shorts toward 1.34600. Patience is key — this could be a high-probability move in the coming weeks.
