USD/CAD price forecast: Loonie under pressure as U.S. tariff threats loom
The USD/CAD pair has pulled back slightly after testing the key 1.4450 resistance level, a psychological barrier that could determine the pair’s next major move. Despite snapping a six-day winning streak, the bullish outlook remains intact as short-term momentum indicators continue to favor buyers.
The nine-day Exponential Moving Average (EMA) at 1.4356 and the 14-day EMA at 1.4334 are providing support, reinforcing the possibility of another upside attempt.
A break above 1.4450 could see the pair testing 1.4793, a level last reached in March 2003. However, failure to sustain above resistance could lead to a correction, with initial support at 1.4356, followed by the three-month low of 1.4151 recorded on February 14. If selling pressure intensifies, a move toward 1.3927 could come into play, marking a four-month low last seen in November 2024.
USD/CAD price dynamics (January 2025 - March 2025) Source: TradingView.
Canadian dollar pressured by U.S. tariffs and oil decline
The Canadian dollar has struggled to gain ground as U.S. trade policy uncertainty weighs on market sentiment. President Donald Trump confirmed plans to impose 25% tariffs on Canadian goods and a 10% tariff on Canadian energy exports by March. This development has raised concerns over the Canadian trade outlook, putting additional pressure on the loonie.
While economic data from Canada has provided some relief, with Q4 GDP expanding at 2.6% annualized, surpassing market forecasts of 1.9%, the impact of rising tariffs and slowing global demand could offset these gains. Crude oil prices, which play a crucial role in Canada’s export revenues, have declined to a two-month low, further dampening demand for the Canadian dollar.Outlook: Can the loonie hold its ground?
Despite the Canadian economy showing resilience, external pressures remain a key risk for the currency. If U.S. tariffs go into effect, market participants could see USD/CAD climbing toward 1.48, as suggested by analysts at ING. However, if oil prices recover and the Bank of Canada (BoC) maintains a cautious approach to rate cuts, the loonie could find some stability.
Investors should watch for further developments in trade talks and BoC policy shifts, as these factors will heavily influence USD/CAD’s next direction. A break above 1.4450 would confirm bullish strength, while a decline below 1.4350 could open the door for a short-term correction.
As previously discussed USD/CAD pulls back from resistance, but bullish momentum remains intact amid tariff concerns.
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