USD/CAD Forecast: Break Above 38.2% Fibonacci Retracement Could Push Toward 1.3900

USD/CAD rose for a second consecutive trading day on Tuesday, extending the rebound from the three-month low near 1.3730 hit last week. As of press time, the pair was trading around 1.3864, up slightly on the day, with technicals confirming a break above the key 38.2% Fibonacci retracement level.

**Break Above Key Resistance**

From a technical chart perspective, USD/CAD's earlier rebound gained momentum around the 38.2% Fibonacci retracement level and has now broken above it. This level serves as the primary technical threshold for gauging the repair of the recent downtrend. With a successful hold above this level, the pair's short-term outlook has turned positive, with the next immediate target pointing to the 1.3900 round figure. According to market technical analysis, a further push through the 50.0% Fibonacci retracement level at 1.3902 would strengthen the bullish case.

**Short-Term Moving Averages Provide Support**

Despite the rebound from lower levels, the pair's short-term trajectory still faces tests. Earlier, USD/CAD traded near 1.3888, remaining below the 100-day simple moving average at 1.3920. The price needs sustained momentum to challenge the dynamic resistance posed by this moving average. A decisive break above it would pave the way for further upside; conversely, rejection there could send the pair back into range-bound trading.

**Diverging USD Outlook**

On the macro front, the dollar's trajectory remains uncertain. A veteran Wall Street investor recently noted that with a sharp decline in short-term U.S. rate expectations, the dollar could depreciate significantly over the next year. However, in the current trading week, the dollar's short-term rebound momentum is dominating USD/CAD's direction. Traders are closely monitoring upcoming economic data and remarks from Federal Reserve officials to assess further guidance on the rate outlook for the dollar.