Canadian Dollar Forecast: USD/CAD Coils Ahead of Reciprocal Trump Tariffs

Canadian Dollar Outlook: USD/CAD

USD/CAD still trades within the February range as it failed to clear the monthly high (1.4543) during the previous week, but the ongoing shift in US trade policy may continue to sway the exchange rate with President Donald Trump on track to impose reciprocal tariffs on April 2.

Canadian Dollar Forecast: USD/CAD Coils Ahead of Reciprocal Trump Tariffs

USD/CAD snaps the range bound price action from last week to approach the monthly low (1.4239), and the exchange rate may struggle to retain the advance from the February low (1.4151) as the Bank of Canada (BoC) seems to be at or nearing the end of its rate-cutting cycle.

The BoC warns that ‘monetary policy cannot offset the impacts of a trade war’ after reducing interest rates for seven consecutive meeting, and Governor Tiff Macklem and Co. may move to the sidelines as the ‘Governing Council will be carefully assessing the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.’

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In turn, the deviating paths between the BoC and Federal Reserve may keep USD/CAD under pressure as the Fed prepares to further unwind its restrictive policy, and data prints coming out of Canada may fuel the recent decline in the exchange rate as the Consumer Price Index (CPI) is anticipated to show sticky inflation.

Canada Economic Calendar

Canada’s CPI is expected to increase to 2.1% in February from 1.9% per annum the month prior, and signs of persistent inflation may generate a bullish reaction in the Canadian Dollar as it puts pressure on the BoC to keep interest rates on hold at its next meeting on April 16.

With that said, USD/CAD may continue to give back the advance from the monthly low (1.4239) as it starts to carve a series of lower highs and lows, but a softer-than-expected Canada CPI print may curb the recent decline the exchange rate as it fuels speculation for further BoC rate-cuts.

USD/CAD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/CAD Price on TradingView

USD/CAD approaches the monthly low (1.4239) following the string on failed attempts to close above the 1.4470 (23.6% Fibonacci retracement) to 1.4510 (23.6% Fibonacci extension) region, and lack of momentum to hold above the 1.4210 (78.6% Fibonacci extension) to 1.4270 (38.2% Fibonacci retracement) zone may push the exchange rate towards the February low (1.4151).
Next area of interest comes in around 1.4110 (50% Fibonacci retracement), but USD/CAD may track the flattening slope in the 50-Day SMA (1.4350) should it continue to hold within the February range.
Need a move back above the 1.4470 (23.6% Fibonacci retracement) to 1.4510 (23.6% Fibonacci extension) region to bring the monthly high (1.4543) on the radar, with the next area of interest coming in around 1.4600 (61.8% Fibonacci extension) to 1.4660 (38.2% Fibonacci extension).

Additional Market Outlooks

EUR/USD Rebounds Ahead of Weekly Low to Keep RSI in Overbought Zone

USD/JPY Rebound in Focus with BoJ Expected to Hold Interest Rate

Gold Record High Price Pushes RSI Towards Overbought Zone

British Pound Forecast: GBP/USD Pulls Back Ahead of November High

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

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