USD/CAD Price Forecast: Gains ground above 1.4100, but overbought signals flag pullback risk
The USD/CAD pair trades on a positive note near 1.4105 during the early European trading hours on Thursday. The US Dollar (USD edges higher against the Canadian Dollar (CAD) after a hawkish hold by the Federal Reserve (Fed) triggered rate-hike bets despite a US-Iran deal.
Federal officials decided to leave the interest rates unchanged in 3.50%-3.75% range at its June policy meeting on Wednesday while signaling the possibility of higher rates later this year as the central bank gauges the inflation effects of the Iran conflict.
"Markets are examining whether the Strait of Hormuz can be reopened for free passage," said Kimmy Tong, global market and FX strategist at Everbright Securities International. "Until that is confirmed, sentiment favouring a stronger dollar should continue to dominate," considering the Fed's tightening bias, Tong added.
Technical Analysis:
In the daily chart, USD/CAD maintains a firm bullish bias as price holds well above the 100-day simple moving average (SMA) and the Bollinger Bands’ middle line, suggesting a sustained breakout phase rather than a mere mean-reversion spike. The Relative Strength Index (14) near 83 signals deeply overbought conditions that hint at risk of a corrective pullback even within the prevailing uptrend.
On the downside, initial support emerges at the former Bollinger upper band area around 1.4100, ahead of the Bollinger middle band clustered near 1.3913, where a dip would still keep the broader bullish structure intact. A deeper retracement would expose the 100-day SMA around 1.3747 and the lower Bollinger band near 1.3726 as subsequent demand zones, with buyers likely to defend these levels to preserve the current upward bias as long as they remain intact.
(The technical analysis of this story was written with the help of an AI tool.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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