The USD/CAD pair extended its decline for a third consecutive session, trading near the 1.3680 area during early European hours on Wednesday. The pair remains under pressure as the US dollar struggles to regain traction, keeping prices close to their lowest levels in five months.
Despite the ongoing weakness, the daily chart structure points to the development of a potential upside breakout. Falling and converging trendlines suggest the formation of a bullish descending wedge pattern, typically associated with a reversal if confirmed by price action.
Technical structure remains bearish for now
USD/CAD continues to trade below both the nine-day Exponential Moving Average (EMA) and the 50-day EMA, preserving a bearish bias in the near term. The technical setup remains negative, with the nine-day EMA positioned below the 50-day EMA and both indicators sloping downward, reflecting sustained selling pressure.
Momentum indicators further support the downside narrative. The 14-day Relative Strength Index (RSI) has dropped to 26.38, deep in oversold territory, and continues to trend lower. While an RSI below 30 signals stretched conditions that could precede a bounce, bearish momentum remains dominant unless prices stabilize above short-term resistance.
Key support and resistance levels to watch
The pair printed a fresh five-month low at 1.3675 on December 24, with immediate support aligning near the lower boundary of the descending wedge around 1.3650. A decisive break below this pattern would reinforce the bearish outlook and expose the downside toward the 1.3539 region, marking the lowest level since October 2024.
On the upside, a corrective rebound could initially target the nine-day EMA at 1.3754, which closely aligns with the upper boundary of the descending wedge near 1.3760. A sustained break above this confluence resistance zone may trigger a broader recovery, opening the door toward the 50-day EMA at 1.3894. Additional resistance is seen near the three-week high at 1.4014.
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