Canadian Dollar Forecast: USD/CAD Remains Susceptible to Trump Tariffs

Canadian Dollar Outlook: USD/CAD

USD/CAD appears to be defending the January low (1.4486) even as US President Donald Trump delays tariffs for Canada, but the exchange rate may no longer track the positive slope in the 50-Day SMA (1.4315) as it trades below the moving average for the first time since October.

Canadian Dollar Forecast: USD/CAD Remains Susceptible to Trump Tariffs

USD/CAD may consolidate over the coming days as it snaps the recent series of lower highs and lows, but the ongoing adjustments in US trade policy may continue to influence the exchange rate as the Trump Administration pushes back the 25% tariff on Canadian goods for one-month.

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US Economic Calendar

It remains to be seen if the Federal Reserve will respond to the shift in fiscal policy as Chairman Jerome Powell is scheduled to testify in front of Congress, but more of the same from the central bank may fuel the recent decline in USD/CAD as the ‘median participant projects that the appropriate level of the federal funds rate will be 3.9 percent’ at the end of this year.

At the same time, the Bank of Canada (BoC) may further embark on its rate-cutting cycle as the tariffs imposed by the Trump Administration raises the threat of a trade war, but it seems as though the central bank is nearing its neutral rate as Governor Tiff Macklem and Co. acknowledge that ‘the cumulative reduction in the policy rate since last June is substantial.’

In turn, the BoC may adjust its forward guidance over the coming months as ‘lower interest rates are boosting household spending,’ but developments coming of the US may continue to sway USD/CAD as president actions taken by the Trump administration clouds the outlook for the global economy.

With that said, USD/CAD may attempt to retrace the decline from the monthly high (1.4793) as it snaps the recent series of lower highs and lows, but the weakness in the exchange rate may persist should it fail to defend the January low (1.4486).

USD/CAD Price Chart – Daily

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

USD/CAD trades within the opening range for February as it holds above the January low (1.4486), with a move back above the 1.4480 (100% Fibonacci extension) to 1.4510 (23.6% Fibonacci extension) region bringing the 1.4600 (61.8% Fibonacci extension) to 1.4660 (38.2% Fibonacci extension) zone on the radar.
Next area of interest comes in around the monthly high (1.4793), but USD/CAD may face a further decline as it trades below the 50-Day SMA (1.4315) for the first time since October.
Failure to defend the January low (1.4486) may push USD/CAD towards 1.4210 (78.6% Fibonacci extension), with the next area of interest coming in around 1.4110 (50% Fibonacci extension).

Additional Market Outlooks

GBP/USD Vulnerable amid Failure to Close Above 50-Day SMA

US Dollar Forecast: EUR/USD Snaps Back Ahead of January Low

USD/JPY Pushes Below January Range Ahead of US NFP Report

Gold Record High Price Pushes RSI Into Overbought Zone

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

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