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USD/CAD Reversal: US Dollar Recovery vs Tariff-Fueled Loonie Jitters

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  • February 24, 2025
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The USD/CAD currency pair recovered around 1.4220 in European trade as the US Dollar regained nearly all of its intraday decline even as dismal US flash PMI data arrived, with market sentiment still subdued amid impending threats of 25% tariffs on imports from Canada. Technical indicators such as a falling triangle pattern and a 20-period EMA indicate a range-bound trend with additional downside risk if important support levels are violated, but a break higher may drive the pair to higher resistance levels. The USD/CAD pair rebounds as the US Dollar recovers from its intraday losses despite disappointing US flash S&P Global PMI data for February. Investor sentiment is becoming cautious against the backdrop of impending fears about possible 25% tariffs for Canadian imports from President Trump, as the Bank of Canada’s Governor threatens of drastic economic ramifications in case tariffs are levied. KEY LOOKOUTS • Move below 1.4151 support, potentially indicating a greater downtrend and driving the pair towards December lows. • US Dollar, since its strength would offset poor US PMI figures and have a strong impact on USD/CAD movements. • Potential tariff news from the US government, since policy changes would again affect investor morale and Loonie stability. • Upside breakout above 1.4246, which would initiate a rally towards resistance levels if market sentiment is supportive. The USD/CAD currency pair has been resilient with a significant rebound to close to 1.4220 as the US Dollar regained intraday losses. Even though poor flash PMI data showed contracting service sector activity in the US, the USD was strong, which helped the Loonie pair. Yet, ongoing uncertainty over prospective 25% tariffs on Canada continues to support a defensive stance for the Canadian Dollar, as President Trump’s review of tariffs further fuels investor anxiety. US Dollar strength will counter weak US PMI figures, and hence the currency recovery will be a key driver for USD/CAD action. Tariff uncertainty is still a major factor, so watch closely for any policy changes by the US administration that may further erode investor confidence and Loonie stability. A fall below 1.4151 may see further selling towards December lows, but good US Dollar resilience holds the pair up even in the face of poor PMI data. Tariff uncertainty is still a major issue, and a breakout above 1.4246 on the upside may release further bullish momentum. • The USD regained its losses rapidly, supporting the pair to recover around 1.4220. • Even after disappointing US flash PMI, the strength of the USD is a major driver. • Speculation of possible 25% tariffs on Canadian imports continues to disturb investor confidence. • The pair is in a descending triangle with a support around 1.4151. • Overlapping of the Loonie price by the 20-period EMA indicates a sideways trend. • The RSI is still in the 40-60 region, showing indecision among market participants. • A bullish move above 1.4246 would potentially see the pair touching resistance areas at 1.4300 and 1.4380, or face further downtrends if it breaks below 1.4151. The US Dollar made a significant comeback in European trading sessions, recovering the majority of its previous losses following miserable US flash S&P Global PMI data. Investors seem to be taking the strength of the US Dollar despite the mixed signals from the economy, showing confidence in the overall strength of the currency. The USD/CAD currency pair has remained strong as the US Dollar recovers from previous losses despite poor US flash PMI figures for February. Investors are looking at the prospects for US monetary policy and the possible effect of an economic slowdown, which has not had a significant impact on the strength of the US Dollar. USD/CAD Daily Price Chart Chart Source: TradingView Meanwhile, market players are still wary as a result of impending threats from possible tariff measures. With President Trump considering not imposing 25% tariffs on Canadian imports and Bank of Canada Governor Tiff Macklem sounding the alarm about dire economic consequences, sentiment on the Canadian dollar is still guarded in this state of uncertainty. TECHNICAL ANALYSIS USD/CAD chart is characterized by a falling triangle formation, with significant support and resistance levels portending future direction. The 20-period EMA overlap signals that there is no strong momentum, while the 14-period RSI, which is always within a neutral range, points to the fact that traders are presently indecisive. Such technical indicators suggest that the market is in consolidation mode, and future price action will be guided by a definitive break from the present balance. FORECAST In case market sentiment turns negative, a breakdown below significant support levels would increase selling pressure, driving the pair towards lower levels seen in earlier sessions. Such a decline may be supported by ongoing economic uncertainties and policy issues, which would lead investors to take a more risk-averse approach that may extend the bearish trend. Conversely, if there is renewed buying interest and momentum picks up, the pair might rally towards higher resistance levels, re-establishing a more bullish trading regime. This would be an indication of enhanced confidence in economic indicators and an adjustment of policy risks, leading to a broader market rebound.

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Currencies

USD/CAD Sustains the Levels with US Jobless Statistics and BoC Rate Rumors

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  • February 21, 2025
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USD/CAD sustains its levels at 1.4150 as market participants consider contradictory economic cues from the US and Canada. The US Dollar is under pressure in the face of higher-than-projected jobless claims and unpredictable Federal Reserve policy, whereas the Bank of Canada (BoC) is likely to slow down rate reductions owing to persistent inflation. Market mood was lifted by US President Donald Trump’s insinuations about trade talk improvements with China but may be anchored by Canadian lumber tariffs. Participants are anticipating more market direction in the release of the forthcoming US PMI figure, the Canadian Retail Sales, and the address of BoC Governor Tiff Macklem. KEY LOOKOUTS • Higher-than-anticipated jobless claims at 219,000 would have a dampening effect on the US Dollar, affecting USD/CAD moves amidst contrasting Federal Reserve policy cues. • Soaring inflation in Canada would compell the BoC to postpone rate cuts, affecting the Canadian Dollar and pushing USD/CAD volatility. • The US S&P Global PMI data due soon will give us a read on economic activity, influencing Fed policy expectations and affecting the USD/CAD pair. • Fresh US tariffs on Canadian wood might weigh on the CAD, escalating economic uncertainty and further pressuring USD/CAD moves in the near term. USD/CAD continues to be under the radar as market players await significant economic reports and policy moves from the US and Canada. Higher-than-projected US jobless claims have pressured the US Dollar, with mixed Federal Reserve signals compounding market uncertainty. In Canada, ongoing inflation could compel the Bank of Canada to hold off on rate cuts, offering potential support for the Canadian Dollar. Meanwhile, the publication of US PMI data will provide new information about economic activity and impact market sentiment. Furthermore, the effect of new US tariffs on Canadian lumber could put pressure on the CAD, introducing another element of volatility into the USD/CAD pair. USD/CAD holds firm as investors weigh US jobless claims, Federal Reserve cues, and Bank of Canada policy forecasts. US PMI and Canadian Retail Sales will offer major market guidance. In the meantime, fresh US tariffs on Canadian lumber might push the CAD lower, boosting volatility. • The currency pair holds firm against recent losses, with investors looking at economic data and policy news from the US and Canada. • Weekly claims increased to 219,000, higher than the expected 215,000, putting pressure on the US Dollar with worries over labor market stability. • Fed officials mention inflation threats and possible stagflation, keeping markets in doubt over future interest rate moves and how they will affect the USD. • Higher Canadian inflation could encourage the BoC to hold off on rate cuts, potentially to support the Canadian Dollar versus the US Dollar. • The S&P Global PMI reading will give insight into US economic activity and affect sentiment towards the USD. • The announcement of additional tariffs on Canadian lumber by President Trump can pressure the CAD due to Canada being a significant exporter. • Retail Sales data and BoC Governor Tiff Macklem’s speech are being followed closely by traders for additional policy cues that will affect USD/CAD action. The USD/CAD currency pair is still in focus for traders due to economic signals from the US and Canada dictating market moods. The US has released the latest report on jobless claims, where higher-than-projected filings indicate possible changes in the labor environment. Discussions around inflation and money policy persist with Federal Reserve members citing worries regarding meeting the 2% inflation rate. On the Canadian side, inflation is still high, fueling speculation that the Bank of Canada will postpone its expected rate reductions. This move could have a profound impact on businesses and consumers, influencing economic expectations for the next few months. USD/CAD Daily Price Chart TradingView Prepared by ELLYANA Also, global trade updates bring an added dimension of interest to the USD/CAD forecast. US President Donald Trump’s revelation of new tariffs on Canadian timber may impact Canada’s export economy, causing alarm about trade relations and economic stability. Meanwhile, market players are eagerly awaiting Canada’s Retail Sales report and Bank of Canada Governor Tiff Macklem’s speech to learn more about the country’s economic condition. These forces, coupled with more general economic trends, will continue to influence the economic narrative for both nations. TECHNICAL ANALYSIS USD/CAD continues to consolidate above the 1.4150 handle following previous declines, signifying a period of market indecision. The pair is met with near-term resistance at 1.4200, a breakout above which may portend additional upside momentum. On the negative side, the major support level is still 1.4120, and a breakdown below could lead to further decline. The 50-day moving average is also serving as dynamic support, and RSI is close to the neutral level, indicating neither overbought nor oversold levels. Traders will be closely monitoring price action for confirmation of the next move, particularly with the release of economic data soon. FORECAST If USD/CAD can break above the 1.4200 resistance level, then it may signal further upward movement. Strong US economic data, especially robust PMI readings, may support the US Dollar, pushing the pair upwards. If the Bank of Canada also gives a hint that it will proceed with caution regarding rate cuts given the ongoing inflation, the Canadian Dollar may dip, further fueling USD/CAD. Any fresh global uncertainty or risk-off mood could also propel the USD as a safe-haven currency, taking the pair to the next resistance level around 1.4250-1.4300. On the bearish side, if USD/CAD is unable to hold above the support level of 1.4150, it may experience more selling pressure. Poorer US economic news, such as weak PMI numbers or higher jobless claims, could bear down on the US Dollar, causing the pair to fall. In addition, if the Bank of Canada becomes more hawkish or conveys optimism over Canada’s economic strength, the Canadian Dollar will likely get stronger, and USD/CAD will be headed for the next levels of support at 1.4120 and 1.4080. Any uptick in Canada’s Retail Sales will also drive CAD strength and heighten the probability of further

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Currencies

USD/CAD Forecast: Bearish Momentum Grows Pre-Employment of Canadian CPI Inflation Data

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  • February 18, 2025
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USD/CAD is trading close to 1.4205 in early European trading, with a bearish bias pre-employment of Canada’s CPI inflation data publication. The pair is still under pressure below the 100-period EMA, with the RSI indicator continuing to signal bearish momentum. The initial key support level stands at 1.4151, with additional downside potential to 1.4130 and the psychological 1.4100 level. On the positive side, near-term resistance is at 1.4265, with a possible breakout to 1.4310 and 1.4380. Focus remains on Canada’s inflation reading, due to increase 1.8% YoY, which may affect USD/CAD’s next direction. KEY LOOKOUTS        • January inflation report, due at 1.8% YoY, will be a determining factor affecting USD/CAD’s next direction and market mood. • The initial resistance at 1.4265, then 1.4310 and 1.4380, may decide whether USD/CAD makes a bullish reversal. • Important downside levels at 1.4151, 1.4130, and 1.4100 will play a pivotal role in determining whether bear pressure becomes more intense in the short term. • A stronger U.S. dollar would cap downside action, while risk sentiment and economic data releases will influence near-term USD/CAD price action. USD/CAD is also in the limelight as traders wait for Canada’s CPI inflation data, expected to increase 1.8% YoY in January. With the pair hovering around 1.4205, the technicals favor a bearish bias since it is still below the 100-period EMA and the RSI is hovering around 46.25. The key downside levels to keep an eye on are 1.4151, followed by 1.4130 and the psychological level of 1.4100. On the positive side, a break above 1.4265 can drive the pair towards 1.4310 and 1.4380. The sentiment of the market and the strength of the U.S. dollar will determine the direction of the next move in USD/CAD. The USD/CAD currency pair quotes around 1.4205 with a bearish bias prior to Canada’s CPI inflation, due out at 1.8% YoY. Important support areas are at 1.4151 and 1.4100, whereas resistance at 1.4265 may dictate further upside potential. Market sentiment and the strength of the U.S. dollar will dictate the next direction of the pair. • USD/CAD is still in pressure below the 100-period EMA, with the RSI at 46.25 showing continuous downside momentum. • Inflation is forecasted to increase by 1.8% YoY in January, impacting sentiment and possible price action in USD/CAD. • Support appears at 1.4151, with deeper potential downside toward 1.4130 and the psychological area of 1.4100. • Resistance is at 1.4265, a breakout potentially pushing the pair through to 1.4310 and 1.4380. • The performance of the Greenback, along with risk mood, will play the key role in deciding whether USD/CAD goes on losing further or corrects. • The pair is moving below the 100-period EMA, while the Bollinger Bands also indicate greater near-term selling pressure. • Buyers and sellers would keep a sharp eye on Canadian CPI releases as well as wider market dynamics because volatility could inject steep price actions in USD/CAD. The USD/CAD currency pair is still under bearish pressure, trading below the 100-period Exponential Moving Average (EMA), which is a fundamental indicator of negative momentum. The Relative Strength Index (RSI) at 46.25 also supports the negative bias, indicating sellers are still in command as long as it remains below the midline. The Bollinger Bands show rising volatility, with the price approaching the lower band, which is a sign of possible further falls. The initial important support level is 1.4151, which a breakdown below may further speed up selling down to 1.4130 and the psychological support of 1.4100. The levels will play a determining factor in ascertaining whether the bearish trend continues. USD/CAD Daily Price Chart TradingView Prepared by ELLYANA On the other hand, on the resistance, the initial important barrier is at 1.4265, which coincides with the top Bollinger Band. A decisive breakout above this level may drive the pair to 1.4310, which coincides with the 100-period EMA. In case buyers can sustain momentum beyond here, more upside potential is available towards 1.4380, the February 10 high. As long as the price is below key resistance points and the RSI is unable to break above 50, the downside bias continues to prevail. Market participants will be paying close attention to Canadian CPI releases and overall risk sentiment, as these underlying drivers may cause tremendous volatility and determine USD/CAD’s next direction. TECHNICAL ANALYSIS USD/CAD is still bearish, with the pair below the 100-period Exponential Moving Average (EMA), which confirms bearish momentum. The Relative Strength Index (RSI) is around 46.25, which is biased towards sellers as long as it remains below the midline. The initial major support is at 1.4151, a fall below which may open up further losses towards 1.4130 and the psychological level of 1.4100. On the higher side, resistance is encountered at 1.4265, coinciding with the top Bollinger Band, with additional obstacles at 1.4310 and 1.4380. A clear break above these levels may change direction towards a reversal to the upside, but presently, the technical indicators are biased towards a further downtrend. FORECAST USD/CAD has some space for upward correction if important resistance levels are broken. The initial resistance level to monitor is 1.4265, which coincides with the top of the Bollinger Band. A breakout above this level could propel the pair to 1.4310, where the 100-period EMA is the next important barrier. If bullish sentiment gains strength, a prolonged rally may aim at 1.4380, the February 10 high. Favorable U.S. economic news or disappointing Canadian CPI inflation data may provide the impetus for a break higher, pushing fresh interest into the U.S. dollar. Moreover, if risk appetite tips in favor of safe-haven assets, USD appreciation may sustain an upside breakout. On the negative side, bearish momentum is still in control as long as the pair is below the 100-period EMA and the RSI is below 50. The initial important support is at 1.4151, the February 14 low, and a break below this level can pick up selling pressure. The next target on the downside is 1.4130, close to the lower edge of

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