The USD/CAD currency pair has recently experienced a pullback from its fresh weekly high of 1.4415. This shift comes as US President Donald Trump edges closer to imposing reciprocal tariffs, stirring up volatility in the forex market. The Canadian Dollar (CAD) is now at a crossroads, with upcoming developments in US trade policy and the Bank of Canada’s (BoC) monetary stance set to play pivotal roles in shaping the pair’s trajectory.
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USD/CAD Rebound Loses Momentum Amid Rising Trade Tensions
After reaching a peak, the USD/CAD’s rebound has fizzled, primarily due to heightened uncertainties surrounding US trade policies. The ongoing tariff threats from the Trump administration cast a shadow over global growth prospects, leading to a sideways trading pattern. This stagnation is reflected in the flattening slope of the 50-Day Simple Moving Average (SMA) at 1.4338, suggesting that the pair might remain range-bound in the near term.
Bank of Canada’s Dilemma: To Cut Rates or Hold Steady?
The BoC faces a challenging environment ahead of its scheduled meeting on April 16. The central bank has acknowledged that the persistent uncertainty stemming from US tariff threats is dampening consumer spending and business investment. In response, the BoC might consider further interest rate cuts to mitigate recession risks. However, the bank remains cautious, as Governor Tiff Macklem and his team weigh the conflicting forces of declining economic activity (which tends to lower inflation) against rising costs from tariffs (which push inflation higher).
Technical Analysis: Key Levels to Watch for USD/CAD
The USD/CAD has managed to hold above the March low of 1.4235, supported by the 78.6% Fibonacci extension at 1.4210 and the 38.2% Fibonacci retracement at 1.4270. A breakthrough above the 1.4470–1.4510 range could set the stage for a test of the March high at 1.4543. If momentum continues, a push past the 1.4600–1.4660 zone could open the door to 1.4790.
Conversely, a drop below the 1.4210–1.4270 region may trigger a decline toward the February low of 1.4151, with the next support level around 1.4110.
Carney Vows Canada Will Counter Trump Tariffs with Strength and Determination
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Steel Plant in Eastern Ontario Announces Layoffs Due to U.S. Tariffs
Canada Imposes C$29.8 Billion in Retaliatory Tariffs on the US
Growing Canada’s Future How Agriculture Can Drive a New Era of Exports
Trump’s 25% Tariffs on Canadian Steel and Aluminum Take Effect
What’s Next for USD/CAD? Key Drivers to Watch
Looking ahead, the USD/CAD outlook hinges on several critical factors:
- US Trade Policy: Any updates on Trump’s tariff strategy could cause sharp market reactions.
- BoC Monetary Policy: The central bank’s decisions and statements will be closely scrutinized for signs of rate cuts or shifts in economic projections.
- Global Economic Trends: Broader economic conditions, including commodity prices and geopolitical events, will continue to influence the Canadian Dollar’s performance.
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