Canadian Dollar Forecast 2025: Seven-Week Selloff Hits Critical Technical Support
The Canadian Dollar has staged a dramatic reversal over the past seven weeks, sending the USD/CAD pair down more than 5.2% from its March 2025 highs. As the pair now trades near pivotal technical levels, all eyes are on whether this slide will find a floor—or continue sliding into deeper territory.
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The price action brings USD/CAD to a confluent support zone that may serve as a critical inflection point. Here’s a breakdown of what this means for traders and investors and the key levels to watch heading into Q2.
Multi-Week Decline Tests Major Trend Support
After peaking in March, USD/CAD has plunged 6.8% from the yearly highs, challenging an important support region between 1.3729 and 1.3795. This zone is formed by:
- The 38.2% Fibonacci retracement of the broader 2021 advance
- The 61.8% retracement of the late-2023 rally
- A key multi-year trendline from 2022 converging in this area
The reaction here will be critical. A rebound could suggest downside exhaustion and offer a window for bullish re-entry, while a breakdown below this zone may open the floodgates to deeper losses.
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Resistance Levels to Watch
Should the pair attempt a rebound, several resistance levels will come into play:
- 1.3947–1.3978: Confluence of the 52-week moving average and 2022 swing high
- 1.4168: 38.2% retracement of the 2025 yearly range
- 1.4292: High-week close and a possible pivot for trend reversal
- 1.4383: Yearly open and strong psychological resistance
A sustained move above 1.4168 would signal that a larger rebound is underway and potentially mark the beginning of a trend reversal.
Support Breakdown Could Trigger Deeper Losses
If the current support fails to hold, the next key targets include:
- 1.3504–1.3523: 1.618% Fibonacci extension of the February drop and the 78.6% retracement
- 1.3360: 2024 low-week close
- 1.3218: 2023 low-week close
A weekly close below 1.3729 would confirm a resumption of the broader downtrend that began in January, signaling potential for further downside in Q2 and beyond.
Trading Strategy Outlook
With the USD/CAD pair now trading at a critical juncture, the setup favors a risk-managed approach:
- Short positions should consider reducing exposure or tightening stops near current levels
- Potential long setups may emerge if bullish divergence or momentum support is confirmed
- Rallies toward 1.4168 could face stiff resistance, making it a potential re-entry zone for shorts if the broader downtrend continues
This inflection point aligns with upcoming U.S. economic data releases, including Core PCE inflation and Non-Farm Payrolls, which may act as catalysts for the next leg in either direction.
Bottom Line
After a relentless seven-week slide, USD/CAD has arrived at a crucial crossroads near a multi-year uptrend support zone. While downside momentum remains in play, this technical threshold raises the risk of a short-term rebound—or at the very least, a pause in the selling.
If bullish momentum fails to materialize here, the breakdown could accelerate toward 1.35 or lower, marking a broader shift in sentiment. Keep a close watch on price action around the 1.3729/95 pivot zone and prepare for elevated volatility as key economic data comes into focus.