The USD/CAD currency pair continues to be caught in a tug-of-war as traders hesitate to take bold positions amid a cocktail of geopolitical, economic, and commodity-driven uncertainty. As of Wednesday’s Asian trading session, the pair struggles to reclaim its footing above the crucial 100-day Simple Moving Average (SMA), a technical barrier that has increasingly attracted fresh waves of selling pressure.
Although spot prices managed to stage a minor rebound from the psychologically significant 1.4200 level, the pair remains locked within a broader sideways channel that’s been in place since the start of the week. This consolidation reflects broader market indecision amid conflicting cues from oil markets, central banks, and global trade headlines.
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🛢️ Crude Oil Collapse Adds Pressure on Loonie
One of the most influential drivers in the current USD/CAD equation is the dramatic downturn in crude oil prices, which recently plunged to fresh multi-year lows. The decline stems from mounting fears that US President Donald Trump’s aggressive tariff measures—and the broader US-China trade war—are steering the global economy toward a recession. A slowdown of that scale would, logically, erode global fuel demand, sending shockwaves through oil-dependent currencies like the Canadian Dollar (aka the Loonie).
Compounding the pressure is growing uncertainty over US-Canada trade relations, which have shown signs of strain in recent weeks. Political uncertainty ahead of Canada’s snap federal election, slated for April 28, only adds to the murky outlook for the Loonie, reinforcing bearish sentiment and giving temporary strength to the USD/CAD pair.
💸 Dollar Softens as Fed Rate Cut Speculation Grows
However, any upward momentum for the pair is being kept in check by broad-based weakness in the US Dollar. Market participants have significantly ramped up their expectations for multiple interest rate cuts by the Federal Reserve in 2025. These expectations are driven by persistent concerns that the tariff war is beginning to erode US economic fundamentals—especially consumer spending and industrial activity.
This ongoing dovish narrative around the Fed has prompted a second consecutive day of USD selling, which in turn places a lid on any substantial bullish attempts in the USD/CAD pair.
With risk sentiment swinging back and forth, many traders are choosing to remain on the sidelines until more clarity emerges from key upcoming events—particularly the release of the Federal Open Market Committee (FOMC) meeting minutes scheduled later today.
📊 CPI, PPI & Trade News on Tap: Will the Fog Lift?
Later this week, market participants will shift their attention to key US macroeconomic indicators that could offer fresh direction for the USD/CAD pair. Thursday’s Consumer Price Index (CPI) and Friday’s Producer Price Index (PPI) reports are expected to serve as crucial barometers for the future path of Fed rate policy.
If inflation metrics come in softer than expected, it would further fuel dovish expectations and could intensify USD selling pressure. On the flip side, any upside surprise could revive USD strength and potentially help the pair break out of its current range.
Canadian Dollar Struggles as USD/CAD Rises to 1.4260
Canadian Dollar Falls to 3-Week Low as Hopes for Tariff Relief Diminish
Will the Canadian Dollar Strengthen or Weaken in 2025? Key Economic and Political Factors to Watch
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USD/CAD Rises Amid Trump’s Tariff Threat Canadian Dollar Outlook
🔁 Short-Term Outlook: Expect Volatility Within the Range
Until a definitive catalyst emerges—be it from inflation data, Fed signals, or trade policy developments—the USD/CAD pair is likely to remain in its established range, with oil price dynamics and geopolitical headlines providing intermittent volatility spikes.
Traders should stay nimble and keep a close eye on technical levels, as well as fundamental shifts. The 100-day SMA continues to act as a ceiling, while the 1.4200 handle provides interim support. A breakout on either side could set the stage for the next directional move in this hotly watched currency pair.
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