USD/CAD Price Forecast: Steadies above June low as bears await 1.4000 breakdown

The USD/CAD pair seesaws between tepid gains/minor losses through the early European session on Friday, consolidating its recent losses to the lowest level since June 17, touched the previous day. However, a combination of supporting factors assists spot prices in holding above the 1.4000 psychological mark.

The US Dollar (USD) regains some positive traction as inflation risks stemming from volatile energy prices keep inflation risks and the US Federal Reserve (Fed) rate hike bets in play. Furthermore, retreating crude oil prices undermine the commodity-linked Loonie and act as a tailwind for the USD/CAD pair. The lack of any meaningful buyers, however, warrants some caution before confirming that a three-day-old downtrend has run its course.

From a technical perspective, this week's breakdown below the 200-period Simple Moving Average (SMA) on the 4-hour chart was seen as a key trigger for bearish traders. Adding to this, the Moving Average Convergence Divergence (MACD) sits below zero with the line in negative territory, while the Relative Strength Index (RSI) hovers near 37. Momentum indicators hint that downside momentum remains dominant despite the proximity of initial support.

However, it will be prudent to wait for some follow-through selling and acceptance below the 1.4000 mark before positioning for deeper losses. The USD/CAD pair might then weaken to the 38.2% Fibo. retracement around 1.3979, which is followed by deeper retracement levels at 1.3897 and 1.3814, where the 50.0% and 61.8% Fibo levels could slow further losses.

On the topside, any recovery would first need to overcome resistance at the 23.6% retracement near 1.4082, with the 200-period SMA at 1.4130 capping the broader upside. Failure to clear the said hurdle will reinforce the prevailing bearish structure while the USD/CAD pair remains below it.

USD/CAD 4-hour chart