Today’s focus is on the Canadian dollar, a currency that has been in the spotlight throughout the week due to a combination of disappointing data and comments from Donald Trump regarding potential tariffs. These factors have added pressure to the loonie, but in the case of USD/CAD, the pair has remained locked in a sideways trend since mid-December.
The price action has formed a clear rectangle, marked by orange lines, which serves as the boundaries of this range. Over the past weeks, USD/CAD has attempted multiple breakouts—both above and below the rectangle. These attempted breakouts, highlighted in blue, have all failed, with price movements quickly reversing direction after crossing the boundaries. This repeated inability to sustain a breakout has left the pair stuck in consolidation, with no clear trend emerging just yet.
For traders, the key takeaway is to wait for a decisive breakout from this rectangle before making a move. A daily close below the lower boundary of the rectangle will signal a bearish breakout, offering an opportunity to sell and anticipate further downside. Conversely, a daily close above the upper boundary will confirm a bullish breakout, signaling a potential move higher and an invitation to buy.
The range-bound movement underscores the ongoing indecision in the market, as both bullish and bearish attempts fail to gain traction. With the backdrop of a volatile week for the Canadian dollar, traders will be watching closely next week for any developments that could finally trigger a breakout and provide clarity on the pair’s next directional move.