USD/CAD Forecast: Loonie Rises on Strong Jobs Data and Fed Pause Bets

Additional support for the Canadian dollar comes from the bipartisan agreement reached in the U.S. Senate on Sunday, which will restore federal government funding through the end of January and effectively end the shutdown. This has increased investor appetite for riskier assets. However, the current decline in USD/CAD appears temporary, as the overall uptrend remains intact amid expectations that the U.S. Federal Reserve will pause its dovish cycle. Based on recent statements, most Fed officials are taking a cautious stance, suggesting that further rate cuts are premature given inflation still exceeds the 2.0% target. In this context, any new signs that the Fed plans to maintain its restrictive policy could trigger a reversal and resume the pair’s upward momentum.

Support and Resistance Levels

The pair is testing 1.4025 (38.2% Fibonacci retracement), supported by the middle Bollinger Band. A breakout below this level could lead to declines toward 1.3916 (Murray level [4/8], lower Bollinger Band) and 1.3855 (Murray level [3/8], 23.6% Fibonacci retracement), although the downside potential appears limited. Conversely, a renewed breakout above 1.4099 (Murray level [7/8]) would open the way toward 1.4221 (Murray level [+1/8]) and 1.4282 (Murray level [+2/8], 61.8% Fibonacci retracement).

Technical indicators confirm the prevailing uptrend: Bollinger Bands are directed upward, and MACD remains stable in the positive zone.

Resistance levels: 1.4099, 1.4221, 1.4282.

Support levels: 1.4025, 1.3916, 1.3855.

Trading Scenarios and USD/CAD Forecast

Long positions may be opened above 1.4099 or on a reversal near 1.3916, with targets at 1.4221 and 1.4282, and stop losses at 1.4030 and 1.3810 respectively.