USD/CAD price forecast: Canadian dollar firms as BoC rate decision looms
USD/CAD holds below $1.44 as investors focus on BoC’s upcoming policy decision
The USD/CAD pair is trading around $1.44 on Tuesday, pulling back from a four-day high of 1.4470 as the U.S. dollar weakens amid rising concerns over economic uncertainty stemming from President Donald Trump’s tariff policies. The market is on edge as investors await the Bank of Canada’s (BoC) interest rate decision on Wednesday, with expectations of a 25-basis-point cut to 2.75% to counteract the impact of rising U.S. tariffs.
President Trump's “America First” tariff agenda continues to create market uncertainty. The U.S. Dollar Index (DXY) fell to a four-month low of 103.35, reflecting investor fears that rising import costs could slow economic growth. As US businesses face increased input costs due to 25% tariffs on Canadian and Mexican goods, the inflationary impact is expected to diminish consumer purchasing power, further dampening demand.
Meanwhile, the Canadian dollar (CAD) has been struggling due to Trump's trade measures, though a temporary one-month exemption on certain USMCA-covered goods has provided some relief. Despite this, the USD/CAD pair remains elevated due to expectations of a BoC rate cut, making the Canadian dollar vulnerable.
USD/CAD price dynamics (Jan 2025 - Mar 2025) Source: TradingView.
Technical outlook: USD/CAD trading within key levels
USD/CAD continues to hold above the 100-period Exponential Moving Average (EMA) at 1.4200, reinforcing its bullish trend. The 14-period Relative Strength Index (RSI) hovers between 40.00 and 60.00, indicating a sideways market trend with no clear directional bias. A break above 1.4470 could push USD/CAD toward the psychological resistance at 1.4500, with further upside potential toward the January 30 high of 1.4595. On the downside, a move below 1.4151 (February 14 low) could expose the pair to the December 9 low of 1.4094, followed by 1.4020 from December 6.
As previously discussed, USD/CAD has been trading within a range of 1.4370 and 1.4545 throughout the week, highlighting market hesitation in pushing the pair significantly higher. The lack of clarity over the ultimate tariff regime continues to weigh on CAD sentiment, limiting upside momentum.
