The US dollar’s recent softness against the Canadian dollar has pushed USDCAD through a technical level that held firm for two months. With the pair now trading below 1.3725, the path of least resistance points lower — and the charts suggest 1.3600 is the next stop. This article is not financial advice. Always conduct your own research before making trading decisions.
- USDCAD has broken the 1.3725 support zone — a level that acted as strong resistance through February and March.
- The break also took out the 61.8% Fibonacci retracement of the prior upward impulse from early March.
- Next technical target sits at 1.3600, with further downside on the table if that floor gives way.
- Broader USD weakness across FX markets is reinforcing the bearish setup.
- Key risk: a sharp reversal in oil prices or a hawkish Fed repricing could invalidate the move.
The Technical Setup: Why 1.3725 Mattered
Support levels built on prior resistance tend to carry more weight than levels pulled from thin air, and 1.3725 was exactly that kind of level. Through February and March, the zone repeatedly capped USDCAD’s upside before eventually flipping into support once price pushed above it. That role-reversal dynamic is classic technical structure — and when it fails, it tends to fail cleanly.
The break did not happen in isolation. Price also sliced through the 61.8% Fibonacci retracement of the sharp upward impulse wave that began at the start of March. The 61.8% level is the deepest retracement most traders consider “corrective” before a move gets reclassified as a full trend reversal. Losing both levels in the same move is a meaningful technical event, not noise.
The Elliott Wave Read
Zooming out, the current leg lower is the active short-term impulse wave iii, nested inside a larger medium-term impulse wave C that began at the end of March. In Elliott Wave terms, third waves are typically the strongest and longest within an impulse sequence — they are where the bulk of a trend’s price damage happens. That structural read is consistent with the speed of the current decline and supports the case for continuation rather than a shallow bounce.
Treating the current move as a wave iii inside a wave C tells us two things. First, the selling pressure is unlikely to exhaust itself at the first obvious support. Second, any counter-trend bounces should be shallow and short-lived until the broader impulse completes.
Where Price Goes Next
With 1.3725 gone, the next logical magnet on the daily chart is 1.3600 — a round-number level that also sits below the current impulse structure. The combination of psychological round numbers and prior price memory tends to attract liquidity, which is why so many technical traders will be watching this zone closely.
If 1.3600 holds, expect a consolidation or corrective bounce before bears try again. If it breaks cleanly, the move opens the door to further downside as the wave C impulse extends. Given the strength shown in the current leg and the bearish US dollar backdrop across the FX complex, the latter scenario cannot be dismissed.
What Could Derail the Bearish Case
No technical setup is bulletproof. A few specific developments would force a rethink of the bearish thesis:
A sharp reclaim of 1.3725 on a daily close would neutralise the breakdown and suggest the move was a false break. Sudden USD strength — driven by a hawkish shift in Fed rhetoric, a stronger-than-expected US data print, or a risk-off flight to the dollar — would cut against the current bearish USD sentiment underpinning this view. And because the Canadian dollar is heavily correlated with oil, any meaningful drop in crude prices could give USDCAD a bid from the CAD side of the pair, independent of what the USD is doing.
Traders should also respect the possibility that wave iii exhausts near 1.3600 and gives way to a wave iv correction before any further downside. Forcing a trade in the middle of a potential corrective bounce is how good setups turn into bad P&L.
FAQ
Why did USDCAD break 1.3725?
The break was driven by a combination of technical and fundamental pressure. Technically, 1.3725 had flipped from resistance to support after February and March and was sitting at the 61.8% Fibonacci retracement of the prior upward move — a confluence that, once lost, tends to trigger accelerated selling. Fundamentally, broad US dollar weakness across FX markets removed the bid that had been defending the level.
What is the next support level for USDCAD?
The next notable support sits at 1.3600. It is a psychological round number and lies within the path of the current Elliott Wave impulse structure, making it the most probable near-term target.
Could USDCAD fall below 1.3600?
Yes. A clean break of 1.3600 would extend the active impulse wave C and open the door to further downside. The speed of the current leg — identified as wave iii — suggests the move has momentum behind it rather than being a one-off flush.
What would invalidate the bearish USDCAD view?
A daily close back above 1.3725 would neutralise the breakdown. A sudden reversal in US dollar sentiment, a hawkish Fed surprise, or a sharp drop in oil prices (which would strengthen the USD leg and weaken the CAD leg) could all change the setup.
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