• USD/CAD may fall toward the falling wedge bottom around 1.3940.
• The 14-day Relative Strength Index slipping to around 39 hints at prevailing bearish momentum.
• The primary barrier lies at the nine-day EMA of 1.4042.

USD/CAD remains subdued for the second successive day, trading around 1.3990 during European hours on Thursday. The technical analysis of the daily chart shows that the pair price is remaining within the falling wedge pattern, suggesting selling momentum is losing strength, signaling a potential bullish breakout.

The USD/CAD pair is keeping a bearish near-term bias as it holds beneath both the nine- and 50-period Exponential Moving Averages (EMAs). The pair has retreated from recent highs with the 14-day Relative Strength Index (RSI) slipping to about 39, which hints at prevailing bearish momentum rather than outright oversold conditions, while the FXS Fed Sentiment Index around 142 suggests a softer policy backdrop that is failing to support the exchange rate at this stage.

On the downside, the USD/CAD pair may find initial support at the lower boundary of the falling wedge around 1.3940. A break below the wedge could put downward pressure on the pair to navigate the region around the five-month low of 1.3732, recorded on May 21. Further support lies at 1.3481, the lowest since October 2024.

The USD/CAD pair may rebound and test the primary resistance confluence around the nine-day EMA of 1.4042, followed by the 50-day EMA at 1.4060 and the upper boundary of the falling wedge around 1.4080. Further upside above this confluence would open the door for the pair to explore the region around nearly an 18-month high of 1.4299, recorded on October 14.

BoC hike seen as start of a cautious tightening phase

Analysts at ING note that the Bank of Canada’s latest move was broadly anticipated, with the BoC having “raised rates by 25bp to 2.50% yesterday, in line with market expectations.” They add that “stronger activity and growing concerns about cost pass-through suggest this is unlikely to be a one-and-done move,” even as policymakers emphasised that they “will proceed carefully,” underscoring a measured approach to any further tightening.