Tag: USD/CAD

• The USD/CAD forecast shows a weaker dollar.

• Data in the previous session revealed softer-than-expected US consumer inflation.

• The Bank of Canada cut interest rates by 25-bps on Wednesday, as expected.

The USD/CAD forecast shows increased bearish momentum after downbeat US inflation data. At the same time, the Canadian dollar strengthened after a cautious tone during the BoC policy meeting. Moreover, support came from reports of Canada’s counter-tariffs on Trump’s steel and aluminum duties. 

Data in the previous session revealed softer-than-expected consumer inflation in the US in February. The CPI increased by 0.2%, a significant drop from the previous reading of 0.5%. Moreover, it was smaller than the forecast of 0.3%. Meanwhile, the annual figure increased by 2.8%, missing estimates of 2.9%.

The downbeat numbers increase pressure on the Fed to lower borrowing costs. A slowdown in the economy plus softer inflation is enough motivation for policymakers to cut interest rates. As a result, rate cut expectations rose, hurting the dollar. 

Meanwhile, the Bank of Canada cut interest rates by 25-bps on Wednesday, as expected. However, the governor said the central bank would proceed with caution due to the uncertainty regarding Trump’s tariffs. Consequently, the loonie gained.

Elsewhere, Trump’s tariff on steel and aluminum imports ignited a trade war with Canada and Europe. Canada is a major exporter of steel and aluminum to the US. 

USD/CAD key events today

• US core PPI m/m
• US PPI m/m
• US unemployment claims

USD/CAD technical forecast: Oscillating in the 1.4301-1.4501 range 

On the technical side, the USD/CAD price is oscillating between the 1.4301 support and the 1.4501 resistance levels. Bears and bulls are battling for control, with each showing strength in this range area. 

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Currently, the price trades in the middle of the range. It has broken below the SMA and the RSI has dropped below 50. This is a sign that bears are trying to retest the range support. However, bulls are threatening to push the price back above the SMA. 

If bears maintain control, the price will soon reach the 1.4301 support level. A break below this level will indicate a bearish win, starting a downtrend. On the other hand, if the price goes back above the SMA, it will revisit the 1.4501 resistance. A break above this level will signal the start of a bullish trend.

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• The USD/CAD forecast shows some relief for the Canadian dollar.

• Trump excluded automakers in Canada from the 25% tariff for a month. 

• Market participants worried about the impact of Trump’s tariffs on the US economy.

The USD/CAD forecast shows some relief for the Canadian dollar as market participants expect a tariff relief on Canada. At the same time, the currency got support as the US dollar fell due to a dimmer outlook for the US economy.

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The Canadian dollar has collapsed since Trump implemented a 25% tariff on Canadian imports. The outlook for Canada’s economy and monetary policy shifted, with experts predicting tough times ahead. This would force the Bank of Canada to assume a more aggressive stance on rate cuts. 

However, there was relief on Wednesday after a phone call from the US to Canada. According to reports, Trump said Canada had yet to meet the conditions to pause tariffs. However, he later softened his stance, excluding automakers from the tariff for a month. This was also a sign that the two countries could negotiate better trading deals to avoid a prolonged trade war. 

Elsewhere, the greenback fell as market participants worried about the impact of Trump’s tariffs on the US economy. Already, data has shown a slowdown that has increased rate cut expectations. The ongoing trade wars will eventually hurt the economy. At the same time, tariffs might reheat inflation, forcing the Fed to keep rates elevated. 

Meanwhile, US data on Wednesday revealed slower-than-expected private job growth. On the other hand, business activity in the services sector rebounded.

USD/CAD key events today

USD/CAD technical forecast: Bearish engulfed turns the table

On the technical side, the USD/CAD price has reversed after peaking near the 1.4501 resistance level. The price now sits far below the 30-SMA, showing bears are in the lead. At the same time, the RSI trades below 50, indicating solid bearish momentum. 

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The previous bullish trend paused when the price neared the 1.4501 resistance level. While the price made higher highs, the RSI made lower ones. This created a bearish divergence that signaled weaker momentum and a looming reversal. Soon after, the price made a bearish engulfing candlestick pattern that pushed USD/CAD below the 30-SMA. 

Bears are now facing the 1.4301 support level. Here, bulls might return to retest the 30-SMA. If it holds firm, the downtrend will continue below 1.4301.

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• The USD/CAD outlook shows widening fears of trade wars.

• Trump’s 25% tariff on imports from Canada and Mexico took effect Tuesday.

• The US president imposed an additional 10% tariff on Chinese goods. 

The USD/CAD outlook shows widening fears of trade wars after Trump implemented tariffs on China, Canada and Mexico. The fears have pushed traders to buy the safe-haven dollar. Meanwhile, the Canadian dollar has collapsed to a one-month low on the prospects of a weaker economy and lower borrowing costs.

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Trump’s 25% tariff on imports from Canada and Mexico came into effect on Tuesday, raising fears of trade wars between these nations. At the same time, the US president imposed an additional 10% tariff on Chinese goods. 

Canada has promised retaliatory tariffs on US imports that could increase tensions between the two countries. The 25% tariff will significantly impact Canada’s economy as the country exports nearly 75% of its goods to the US. The Bank of Canada has worked tirelessly to spur the fragile economy with lower borrowing costs. Moreover, recent economic data has shown a rebound. Therefore, Trump’s tariff will undo most of this work, forcing the BoC to assume a more aggressive stance on rate cuts. 

Meanwhile, the US dollar strengthened along with Treasury yields as market participants sought safety due to trade war fears. Manufacturing PMI data in the previous session had little impact on the currency as it aligned with expectations.

USD/CAD key events today

Market participants do not expect any key economic reports today. Therefore, they will keep digesting the impacts of Trump’s tariffs.

USD/CAD technical outlook: Price breaks past 0.5 Fib, eying 1.4600

On the technical side, the USD/CAD price has bounced off the 30-SMA with a massive bullish candle, indicating a surge in momentum. Moreover, the price has broken above the 0.5 Fib level that had previously acted as a solid resistance. This level allowed the price to retest the 1.4400 support level. 

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USD/CAD can now climb to the next resistance at the 1.4600 level. If the bullish bias remains, the uptrend will continue past 1.4600. However, the RSI has reached the overbought region several times and has shown some weakness. 

Bulls might be exhausted after the steep climb from the 1.1.4150 support level. Therefore, the price might pause at the next resistance as bulls rest. Moreover, after such a sharp rally, the price might pause for long or consolidate before it continues higher.

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• The USD/CAD outlook indicates unexpected strength in Canada’s economy.

• The outlook for Canada’s economy remains gloomy.

• PCE data revealed a decline in US consumer spending.

The USD/CAD outlook indicates unexpected strength in Canada’s economy that has paused the loonie’s recent decline. However, the outlook for the currency remains bleak as market participants expect Trump’s tariffs to start this month. On the other hand, the dollar eased slightly on Friday after data revealed weak consumer spending.

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Data on Friday revealed that Canada’s economy expanded by 2.6% annually, compared to estimates of 1.8%. The upbeat report showed recent BoC rate cuts had revived growth. At the same time, it stemmed declines in the loonie after Trump confirmed that his tariff on Canada would start this month. 

However, the outlook for Canada’s economy remains gloomy since a 25% tariff will significantly hurt demand. Canada exports nearly 75% of its goods to the US. The tariff would pressure the Bank of Canada to lower interest rates further and support the economy. This, in turn, will be bearish for the Canadian dollar. 

On the other hand, a response from Canada would likely lead to a trade war between the two nations that would hurt risk appetite. 

The dollar paused its climb against the loonie after PCE data revealed a decline in US consumer spending. As a result, market participants are pricing a higher likelihood of a Fed rate cut in June.

USD/CAD key events today

USD/CAD technical outlook: Sharp bullish move halts at 0.5 Fib level

On the technical side, the USD/CAD price is in a strong, bullish move and has broken above the 1.4400 resistance level. It trades above the 30-SMA, and the RSI is near the overbought region, suggesting a solid bullish bias. 

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However, bulls have met a solid hurdle at the 0.5 Fib retracement level. This might cause a pullback to the 30-SMA. Nevertheless, if bulls remain strong, the price will bounce off the SMA and break above the Fibonacci level to continue the uptrend. Moreover, bulls will have a clear path to the 1.4600 resistance level. 

On the other hand, if the Fib level holds firm and the price breaks below the 30-SMA, it will indicate a bearish sentiment shift. This would allow USD/CAD to revisit the pivotal 1.4150 support level.

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• The USD/CAD weekly forecast indicates a dim outlook for Canada’s economy.

• US tariffs on Canadian goods will come into effect in March.

• The dollar surged as traders sought safety amid economic uncertainty.

The USD/CAD weekly forecast indicates a dim outlook for Canada’s economy as Trump plans to implement a 25% tariff in March.

Ups and downs of USD/CAD

The USD/CAD pair had a bullish week as the dollar rebounded amid safe-haven inflows. This week, the dollar was on the front foot as Trump maintained his aggressive push for tariffs in Canada and Mexico. 

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The US president surprised markets by saying the tariffs would come into effect in March. Analysts had expected another delay to April. As a result, fears of a weaker economy in Canada amid lower demand hurt the loonie. On the other hand, the dollar surged as traders sought safety amid economic uncertainty.

Next week’s key events for USD/CAD

Market participants are looking forward to key reports from the US, including manufacturing PMI and employment. Meanwhile, Canada will only release its monthly employment figures.

Traders will keenly monitor employment numbers from the US and Canada to determine what the Fed and the Bank of Canada will do in the near future. Upbeat reports will lower bets for rate cuts. Meanwhile, a downbeat report will pressure both central banks to cut borrowing costs.

USD/CAD weekly technical forecast: Bulls resurface, targeting 1.4804

On the technical side, the USD/CAD price has bounced back after an attempt by bears to reverse the trend. The price has broken above the 30-SMA, indicating a bullish shift in sentiment. At the same time, the RSI now trades above 50, suggesting solid bullish momentum. 

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The previous bullish trend paused just below the 1.4804 resistance level. The price had made a strong bullish gap to this level. However, bears emerged with stronger momentum, closing the gap and forming a bearish engulfing candle. This sudden strength pushed the price below the SMA, challenging the uptrend.

However, bears could not push the price beyond the 1.4150 support level, allowing bulls to return to the market. This return might only be brief to retest the 1.4804 resistance. However, it might also allow USD/CAD to continue its previous bullish trend. If bulls maintain their position above the 1.4400 key level, the price will revisit the 1.4804 resistance.

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• The USD/CAD outlook shows tariff uncertainty.

• Trump delayed the implementation of a 25% tariff on Canadian and Mexican goods.

• Traders eagerly await the US inflation report due on Friday.

The USD/CAD outlook shows tariff uncertainty, which is weighing on the Canadian dollar and strengthening the US dollar. Uncertainty about Canada’s economy amid tariffs has weakened the loonie. On the other hand, uncertainty about the global economy has hurt risk appetite, boosting the dollar. 

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This week, Trump sent mixed signals regarding tariffs that caused a lot of uncertainty among traders. The US president proposed a 25% reciprocal tariff on European cars and goods that would significantly hurt the Eurozone economy. 

However, Trump also delayed the implementation of a 25% tariff on Canadian and Mexican goods. The delay gave the Canadian dollar a slight boost. However, the risk of a weak economy due to tariffs puts a lid on gains. The Bank of Canada has expressed worries about the impact of Trump’s tariffs on the economy. The central bank has worked tirelessly to lower borrowing costs and spur economic growth. Therefore, tariffs would undo the progress and pressure the BoC to lower borrowing costs. 

Meanwhile, market participants are paying attention to economic data from the US. Recent reports have shown weak business activity, raising Fed rate cut expectations. The inflation report due on Friday will provide more clues on the outlook for rate cuts. 

USD/CAD key events today

• US prelim GDP q/q
• US unemployment claims

USD/CAD technical outlook: Bulls looking at 1.4400 resistance

On the technical side, the USD/CAD price is approaching the 1.4400 resistance after a recent trend reversal. Bulls took charge after the price paused its decline near the 1.4150 support level. As a result, USD/CAD now trades above the 30-SMA with the RSI above 50, supporting a bullish bias.

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However, the new rally is about to face its first hurdle at the 1.4400 resistance level. A break above this level will strengthen the bullish bias, allowing the price to make higher highs and lows. On the other hand, if the level holds firm, bears might resurface to retest the 1.4150 support level.

The bullish bias will remain if the price stays above the 30-SMA. On the other hand, if it breaks below the SMA and the 1.4150 support, the previous downtrend will continue.

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• The USD/CAD forecast is bullish as US yields surge.
• The Canadian dollar remains under pressure amid weaker WTI and tariff fears.
• Fed speeches and Nvidia’s earnings are key to watch today.

The USD/CAD forecast remains elevated as the price posts a fourth consecutive session in gains. The pair is trading at 1.4330 at the time of writing. The US dollar surges as Treasury yields soar. The 2-year and 10-year yields have risen to 4.13% and 4.33%, respectively.

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The Fed’s Richmond President, Thomas Barkin, projected a decline in the US Core PCE figures, highlighting the Fed’s progress in coping with inflation. However, he maintained a “wait and see” stance for the next cuts due to economic uncertainties.

The Canadian dollar remains under pressure as President Trump reaffirmed the tariff imposition on Mexico and Canada. Despite the diplomatic efforts of Canada to get exemptions, Trump’s hard stance has thickened the trade relations concerns. Moreover, Trump’s assertion that the US doesn’t need Canadian crude oil or lumber poses a threat to the historic trade relationship between the two countries.

Falling crude oil prices due to demand concerns further weaken the Canadian dollar. The WTI prices have declined to $69.00 as US economic growth remains a concern while global uncertainties prevail. A potential peace deal between Russia and Ukraine could result in lifting the Russian oil ban, which could further boost the supply and weigh down prices.

Despite the USD/CAD’s recent rally, the broader sentiment could limit the gains. The US economic data shows growth concerns as consumer sentiment data fell to the lowest level since Aug 2021.

Nvidia’s earnings report is also important to watch, as a miss in the number could trigger risk-off sentiment and favor the dollar bulls.

Market Catalysts Today:

• US New House Sales
• Fed Speeches
• Nvidia’s earnings

USD/CAD Technical Forecast: Cup and handle pattern

The USD/CAD remains well-bid above the 30-period SMA on the 4-hour chart. However, the 14-period RSI suggests no bullish conviction, as the value is in the overbought zone. Smaller bullish candles also suggest the pair lacks the strength to continue the rally. The 1.4383 (horizontal level) could cap the gains.

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However, the pair is forming a cup and handle pattern, which is a strong bullish sign. If the pair finds acceptance above 1.4383, the next hurdle will be 1.4425 ahead of 1.4495. On the flip side, rejection from current levels could challenge the 1.4300 support ahead of 1.4233 (30-SMA) and then 1.4200.

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• The USD/CAD outlook shows easing fears of a trade war between the US and China.

• Trump said he would soon meet China’s president. 

• Market participants are expecting retail sales data from Canada.

The USD/CAD outlook shows easing fears of a trade war between the US and China which has boosted risk sentiment, weighing on the dollar. Meanwhile, the Canadian dollar held steady as market participants looked forward to Canada’s retail sales report. 

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The dollar fell on Friday after Trump said he would soon meet China’s president. This increased the likelihood that the two countries would reach an agreement to end tariffs and avoid a trade war. Trump imposed a 10% tariff on Chinese imports, which led to an immediate response. China also imposed duties on some US goods, raising fears of a trade war between the two largest economies. As a result, risk sentiment soured, and the dollar soared on safe-haven demand.

However, it has become clearer that Trump is more willing to negotiate better trade deals. This means that the tariffs are mostly just threats to push countries to comply with his conditions. As a result, currencies like the Canadian dollar have rebounded. 

The loonie has also recovered due to upbeat inflation figures from Canada earlier in the week, which eased pressure on the BoC to cut rates. Market participants are now expecting retail sales data for more clues on the outlook for rate cuts.

USD/CAD key events today

• Canada core retail sales m/m
• Canada retail sales m/m
• US flash manufacturing PMI
• US flash services PMI

USD/CAD technical outlook: Bullish takeover fails, bears retest 1.4150

On the technical side, the USD/CAD price trades below the 30-SMA with the RSI under 50, indicating a bearish bias. However, bulls recently showed strength when the price broke above the 30-SMA. At the same time, the RSI broke above 50, suggesting strong bullish momentum. This is a sign that bulls have started challenging the downtrend. 

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Since bears took control, the price has stayed below the 30-SMA and the RSI below 50. At the same time, the price has made lower highs and lows. Therefore, the downtrend will continue if the price breaks below the 1.4150 support level and makes a lower low. 

However, if the support holds firm, bulls might resurface to challenge the downtrend by breaking above the SMA. Still, to confirm a reversal, the price must start making higher highs and lows, meaning a break above the 1.4300 resistance.

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• The USD/CAD price analysis shows anticipation before Canada’s CPI.

• Economists expect Canada’s monthly inflation to rise by 0.1% after a 0.4% drop.

• Data on Friday revealed a sharp decline in US sales.

The USD/CAD price analysis shows anticipation building ahead of crucial inflation figures from Canada. Meanwhile, the dollar recovered slightly on Monday as market participants looked forward to the FOMC policy meeting minutes. However, the currency held near lows hit last week after downbeat sales data and delays in Trump’s tariffs.

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Canada will release its consumer inflation report later in the day, shaping the outlook for Bank of Canada rate cuts. Economists believe price pressures increased, with the monthly figure rising by 0.1% after a 0.4% drop. Meanwhile, the annual figure might increase by 2.5%, compared to the previous reading of 2.4%.

Such an outcome would ease pressure on the Bank of Canada to lower borrowing costs. Consequently, the loonie would continue its recent rally. On the other hand, if inflation is lower than expected, the BoC would be under immense pressure to cut, especially with uncertainty regarding Trump’s tariffs. 

Meanwhile, the dollar recovered after a bearish week. Data on Friday revealed a sharp decline in sales, leading to a surge in Fed rate cut expectations. At the same time, a delay in Trump’s reciprocal tariffs weakened demand for the greenback. This week, traders will watch for policy clues in the FOMC minutes. 

USD/CAD key events today

• Canada CPI m/m
• Canada median CPI y/y
• Canada trimmed CPI y/y

USD/CAD technical price analysis: Bears find their feet after range breakout

On the technical side, the USD/CAD price has paused its decline near the 1.4150 support level. This has allowed the price to recover slightly. However, it still trades below the 30-SMA with the RSI under 50, suggesting a bearish bias. Therefore, even if the price continues higher, it might fail to break above the 30-SMA. 

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The beamish move comes after a consolidation period when the price held steady between the 1.4300 support and the 1.4501 resistance levels. Initially, bulls broke out of this range after a spike in volatility. However, the price fell back into the area before breaking below the range support. 

Given the strong bearish bias, USD/CAD might soon bounce lower to retest the 1.4150 support level. A break below this level will make a lower low confirming the new bearish trend.

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• Trump announced a 25% tariff on steel and aluminum imports.

• The outlook for the US economy is brightening with additional tariffs.

• Economists believe US inflation will be slower, increasing by 0.3% in January.

The USD/CAD price analysis shows CAD sellers returning to the market amid fears of the impact of Trump’s new tariffs on Canada’s economy. However, trading remained thin as market participants eagerly waited for the crucial US consumer inflation report due on Wednesday.

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The Canadian dollar eased after Trump announced a 25% tariff on steel and aluminum imports starting on 4th March. Canada got a one-month relief from a 25% tariff on all its goods to the US. However, the country is also a major exporter of steel and aluminum to the US. Therefore, the new tariffs have dimmed the outlook for Canada’s economy. Moreover, the Bank of Canada will be under a lot of pressure to lower borrowing costs and support the economy. 

Meanwhile, the outlook for the US economy is brightening with additional tariffs. Duties on imports will force consumers to buy local products, boosting economic demand. At the same time, local production will increase, further supporting the economy. 

Meanwhile, market participants expect the US consumer inflation report on Wednesday. Economists believe inflation will be slower, increasing by 0.3% in January. Meanwhile, the annual figure might mirror the previous month’s 2.9% increase. An upbeat report will boost USD/CAD as it will imply a hawkish Fed and a monetary policy divergence between the US and Canada.

USD/CAD key events today

• Fed Chair Powell Testifies

USD/CAD technical price analysis: Small-bodied candles indicate indecision

On the technical side, the USD/CAD price has paused near the 1.4300 support level. The pause comes after a sharp decline that pushed the price well below the 30-SMA. At the same time, the RSI dropped below 50, indicating stronger bearish momentum. 

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However, bears were unable to break below the 1.4300 support, allowing the 30-SMA to catch up. The pause also allowed bulls to resurface and break above the 30-SMA. However, the break was weak as the price is making small-bodied candles. This is a sign that there is still indecision at this level, with bears and bulls fighting for control. 

If bulls win, the price will climb higher to retest the 1.4450 resistance level. On the other hand, if bears win, the price will break below the 1.4300 support to make lower lows.

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• Trump said he would impose tariffs on steel and aluminum imports.

• Canada’s economy added 76,000 jobs in January.

• US jobs data indicated a mixed picture of the labor sector.

The USD/CAD forecast shows caution in the markets as traders weigh the impact of Trump’s tariffs on the global economy. Nevertheless, after an upbeat employment report, the Canadian dollar held near recent highs. On the other hand, a mixed US report kept rate cut expectations mostly unchanged. 

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Over the weekend, US President Donald Trump said he would impose tariffs on steel and aluminum imports, raising concerns of trade wars. More tariffs will likely boost the dollar as local production and consumption increase. However, trade wars might hurt the global economy and impact the US. Canada escaped a 25% tariff that was to start last week, boosting the Canadian dollar. However, this pause might end next month, exposing Canada’s economy to punitive duties. 

Nevertheless, the tariff relief last week supported the loonie. Moreover, data on Friday revealed that Canada’s economy added 76,000 jobs in January, well above estimates. At the same time, the unemployment rate unexpectedly fell to 6.6%. This eased pressure on the Bank of Canada to lower borrowing costs. 

Meanwhile, US data on Friday showed slower job growth in January. However, the unemployment rate dropped, indicating a mixed picture of the labor sector. Traders are now looking forward to inflation data.

USD/CAD key events today

Market participants do not expect any key economic reports from the US or Canada. Therefore, they will focus their attention on US tariff developments.

USD/CAD technical forecast: Bears challenge the 1.2400 support

On the technical side, the USD/CAD price trades below the 30-SMA with the RSI below 50, indicating a bearish bias. The trend recently reversed after bullish momentum faded at the 1.2550 resistance level. Although the price made a higher high, the RSI made a lower one, creating a bearish divergence. This allowed bears to take charge by breaking below the 30-SMA. 

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However, bears have met a solid hurdle at the 1.2400 support level. A break below this support will allow the price to reach the 1.2251 level. This will confirm a bearish trend. On the other hand, if the support holds firm, USD/CAD will bounce to retest the 1.2550 resistance level. A break above this level would confirm a continuation of the previous bullish trend.

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• The Canadian dollar has gained sharply since Trump paused an expected 25% tariff.

• Economists expect slower job growth in the US and Canada.

• Unemployment might increase in Canada.

The USD/CAD price analysis shows a brighter future for the Canadian dollar since Trump paused a 25% tariff on Canadian goods. Meanwhile, market participants are gearing up for employment figures from Canada and the US that will guide monetary policy in both countries.

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The Canadian dollar has gained sharply since Trump paused an expected 25% tariff on Canadian goods. The tariff had dimmed the outlook for an economy that exports nearly 70% of its goods to the US. Moreover, economists were predicting a more aggressive Bank of Canada easing cycle to balance the impacts of tariffs. However, Canada managed to negotiate better trade deals, giving the country more time. 

At the same time, since the pause, traders are more convinced that Trump is only using the threat of tariffs as a negotiation tactic. Therefore, there is little risk of global trade wars.

Elsewhere, Canada and the US are set to release their monthly employment figures, which will shape the outlook for BoC and Fed rate cuts. Economists expect slower job growth in both countries. Meanwhile, unemployment might increase in Canada and hold steady in the US. Weak data will increase rate-cut bets for the BoC and Fed. Meanwhile, upbeat figures might lower rate cut expectations.

USD/CAD key events today

• Canada employment change
• Canada unemployment rate
• US average hourly earnings m/m
• US nonfarm employment change
• US unemployment rate

USD/CAD technical price analysis: Price falls back into the range area

On the technical side, the USD/CAD price has paused its decline near the 1.4300 support level. The price still trades well below the 30-SMA with the RSI below 50, suggesting a strong bearish bias. 

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Bears took charge after a large bullish gap that pushed USD/CAD to a new high. Soon after, the price filled the gap and fell back below the 30-SMA. At the same time, the price fell back into its previous range between the 1.4300 support and the 1.4450 resistance. However, this time, bears are showing stronger momentum. 

Therefore, the price might break below the range resistance to start a new downtrend. On the other hand, if bulls are also strong, the price will bounce off the range support to retest the range resistance level. Such an outcome would indicate a continuation of the previous range.

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• The US and Canada agreed to pause the 25% tariff announced on Monday.

• A 10% tariff on Chinese goods took effect on Tuesday.

• Business activity in Canada’s manufacturing sector slowed in January.

The USD/CAD outlook shows a sharp shift in sentiment that has boosted the Canadian dollar. A pause in Trump’s tariffs on Canada allowed the loonie to recover most of its losses from Monday.

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The USD/CAD pair reversed sharply after reports that the US and Canada had reached an agreement that would pause the 25% tariff announced on Monday. This removed the risk of a trade war between the two countries. At the same time, it lifted the dark cloud cast over Canada’s already fragile economy. Avoiding tariffs means that the Bank of Canada can continue at its current pace without fears of further slowdown in the economy. As a result, the Canadian dollar recovered. 

However, a 10% tariff on Chinese goods took effect on Tuesday, causing a similar response from China. Authorities in China have promised to implement a 10% duty on US goods starting February 10th. The tariff allowed the greenback to recover against its peers on Tuesday. However, a trade war between China and the US will likely still cause market turmoil.

Elsewhere, data revealed that business activity in Canada’s manufacturing sector slowed in January. This easing came as investors feared the impact of Trump’s tariffs on the economy. 

USD/CAD key events today

USD/CAD technical outlook: Whiplash move signals indecision

On the technical side, the USD/CAD price has dropped and filled the gap created in the previous session. At the same time, the price has fallen to retest the 30-SMA and the recently broken range resistance. This has created a whiplash move, indicating a surge in volatility. Moreover, it shows that both bears and bulls are strong. Therefore, although the price broke out of consolidation, there is still no clear direction. 

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Currently, the price trades slightly above the 30-SMA, supporting a bullish bias. If bulls regain momentum, USD/CAD will bounce higher to retest the 1.4600 resistance. However, to confirm a bullish trend, the price must make a higher high above the 1.4801 resistance level. Otherwise, USD/CAD might start a new range. On the other hand, if bears overpower bulls, the price will break below the 30-SMA to challenge the 1.4300 range support.

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• US President Donald Trump announced the start of tariffs on Canada.

• Trump’s tariffs will pressure the Bank of Canada to cut interest rates. 

• Canada’s economy contracted by 0.2%.

The USD/CAD outlook indicates a looming trade war between the US and Canada after Trump implemented a 25% tariff on Canadian goods. At the same time, Canada’s economy remains weak, putting pressure on the Bank of Canada to lower borrowing costs. Hence, the price tested fresh multi-decade highs near 1.4800 area. 

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US President Donald Trump announced the start of tariffs on Canada, Mexico, and China on February 4th. The US will impose a 25% tariff on goods from Canada, likely leading to a drop in demand and a trade war between the two countries. Top officials in Canada have emphasized their ability to respond appropriately to any heavy tariffs. Moreover, Canada promised to retaliate after Trump’s announcement, meaning a trade war. 

The 25% tariff will hurt an already fragile economy, increasing pressure on the Bank of Canada to cut interest rates. Notably, data on Friday revealed that Canada’s economy contracted by 0.2%, a bigger-than-expected decline. The economy has weakened due to high interest rates, forcing policymakers to lower borrowing costs aggressively.

Tariffs will only worsen the situation, leading to a collapse in the Canadian dollar. Canada’s currency fell by 1% in January, its fifth month of declines. Trump’s tariffs might extend this decline, pushing USD/CAD higher.

USD/CAD key events today

USD/CAD technical outlook: Bulls trigger a solid range breakout

On the technical side, the USD/CAD price has finally broken out of consolidation. Bulls broke above the 1.4450 range resistance level with a solid candle. Moreover, the price made a huge gap above the 1.4600 psychological level, indicating a sharp increase in bullish momentum. At the same time, the RSI jumped to the overbought level. 

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The bullish move has paused near the 1.4801 level. However, the price trades far above the 30-SMA and might pause or pull back as the SMA catches up. This will also allow the price to fill the gap before continuing higher. 

A retreat might pause at the 1.4600 level. If bulls are still strong after a pullback, the price will likely break above the 1.4801 level to make a higher high, confirming a new bullish trend. Bears will only take control if the price breaks below the 30-SMA.

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• The BoC lowered borrowing costs by 25-bps as expected.

• Canada’s central bank downgraded its economic forecasts.

• The Federal Reserve kept rates unchanged as expected.

The USD/CAD forecast shows a divergence in policy and economic outlooks between the Bank of Canada and the Fed due to Trump’s policies. BoC policymakers are worried Trump’s tariffs will weaken the economy, leading to more rate cuts. On the other hand, Fed officials remained silent about rate cuts as Trump’s policies could boost the economy, forcing them to pause. 

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On Wednesday, the BoC lowered borrowing costs by 25-bps as expected. At the same time, policymakers noted that a tariff on Canadian goods to the US would significantly hurt the economy. As a result, the central bank downgraded its economic forecasts. Such a dim outlook for the economy puts pressure on officials to keep cutting interest rates to balance the effects of Trump’s policies. 

Meanwhile, the Federal Reserve kept rates unchanged as expected, maintaining a cautious tone. Market participants had waited to hear more about future rate cuts. However, Powell gave little guidance on future moves. Moreover, he pointed to the uncertainty surrounding Trump’s policy changes.

Experts believe tariffs will boost the US economy. Therefore, the Fed will likely keep rates elevated, a divergence from the BoC’s outlook. High rates in the US and low borrowing costs in Canada will create a wide gap that will boost the USD/CAD pair.

USD/CAD key events today

• US advance GDP q/q
• US unemployment claims

USD/CAD technical forecast: Bulls struggle to end consolidation

On the technical side, the USD/CAD price has pulled back after another failed attempt to break above its range resistance. However, the bullish bias within the range remains strong since the price trades above the 30-SMA. At the same time, the RSI trades above 50 in bullish territory. 

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Therefore, if USD/CAD does not break below the SMA, bulls might make another attempt to break the 1.4450 resistance level. On the other hand, if the range resistance remains firm, bears will take the lead by breaking below the SMA to revisit the range support. 

USD/CAD has maintained a holding pattern long after the previous bullish trend. Bulls are making more attempts to break out of this range than bears. If they succeed, the bullish trend will continue past the 1.4551 level. If they fail, the trend will likely reverse to the downside.

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• The Canadian dollar strengthened amid relief over Trump’s soft approach to tariffs.

• The US released softer-than-expected business activity data.

• The Fed will likely keep rates unchanged while the BoC lowers.

The USD/CAD forecast indicates increasing bullish sentiment as market participants gear up for monetary policy meetings in the US and Canada. The Fed will likely keep rates unchanged and remain cautious. On the other hand, economists expect the Bank of Canada to lower borrowing costs by 25-bps. 

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Last week, the Canadian dollar strengthened amid relief over Trump’s soft approach to tariffs. The US president had many occasions where he could have emphasized and given more guidance on his tariff proposals. However, he remained mostly silent. Moreover, there is a likelihood he will not impose any tariffs on China.

The loonie also strengthened as the week ended with downbeat US economic data. The dollar dropped after the US released softer-than-expected business activity data. Service sector business activity fell sharply, with the PMI dropping from 56.8 to 52.8.

However, as the week ended, the market focus shifted to the looming policy meetings in the US and Canada. The Fed will likely keep rates unchanged while the BoC lowers. Such an outcome might strengthen the dollar and weaken the loonie, leading to a rally in the USD/CAD price. However, traders will also focus on the messaging for future policy moves.

USD/CAD key events today

Market participants are not looking forward to high-impact economic reports from the US or Canada today. Therefore, the price will likely consolidate.

USD/CAD technical forecast: Consolidation continues

On the technical side, the USD/CAD price has maintained its consolidation between the 1.4300 support and the 1.4450 resistance levels. A spike in volatility last week failed to trigger a breakout. Currently, volatility has fallen back to normal levels. 

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The price trades above the 30-SMA within the range, with the RSI slightly above 50, suggesting a bullish bias. Therefore, bulls might soon challenge the range resistance. A strong break above the 1.4450 resistance will confirm a bullish breakout. Such an outcome would allow USD/CAD to reach the 1.4551 resistance level. 

Moreover, if the price starts making higher highs and higher lows, it will confirm a new bullish trend. On the other hand, there is still a chance the price will remain in consolidation. If the 1.4450 resistance holds firm, bears will return to revisit the range support level.

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• Trump failed to provide guidance on the proposed 25% tariff on Canadian goods.

• The US president said the Fed should continue lowering borrowing costs.

• Data from Canada revealed that retail sales made no change in November.

The USD/CAD outlook shows the impact of Trump’s tariff threats fading, allowing the Canadian dollar to recover. On the other hand, the US dollar eased after Trump called on the Federal Reserve to continue lowering borrowing costs. 

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Market participants had eagerly awaited Trump’s speech on Thursday for more clues on proposed trade tariffs. However, he failed to provide guidance on the proposed 25% tariff on Canadian goods. As a result, investors were relieved, and the Canadian dollar rebounded.

Instead, the US president said the Fed should continue lowering borrowing costs. Analysts have forecasted a hawkish Fed under Trump’s administration. This outlook has boosted the dollar’s rally in recent weeks. However, if the president supports the central bank’s objective of attaining price stability, interest rates will drop, and the dollar will fall. 

Meanwhile, data from Canada revealed that retail sales made no change in November, compared to estimates of a 0.2% increase. However, traders focused on the flash estimate for December, which indicated a 1.6% jump in sales. A rebound in Canada’s economy will ease pressure on the Bank of Canada to lower borrowing costs, allowing the loonie to recover. 

USD/CAD key events today

• US flash manufacturing PMI
• US flash services PMI

USD/CAD technical outlook: Bears aiming for a range breakout

On the technical side, the USD/CAD price trades below the 30-SMA with the RSI below 50 in bearish territory. Therefore, bears are in the lead. However, on a larger scale, the price has remained in consolidation between the 1.4300 support and the 1.4450 resistance for a long time. 

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It has chopped through the 30-SMA with no clear direction during this time. At the same time, the RSI has oscillated between bearish and bullish territory, showing no bias. Therefore, if this consolidation continues, the price will soon reverse at the range support. 

However, if bears are finally ready to take charge, USD/CAD will break below the range support. Such an outcome would allow the price to make a lower low and start trending lower. Moreover, it will allow bears to retest the support levels like 1.4201.

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