USD/CAD price forecast: Holds near $1.44 as BoC rate cut and U.S.-Canada trade talks drive sentiment
Canadian dollar holds near 1.44 as BoC signals cautious rate cuts amid U.S. tariff risks
The USD/CAD pair remains subdued around 1.4430-1.4425 on Friday, struggling to build on recent gains while holding above the 1.44 mark. The modest recovery in the U.S. dollar (USD) and optimism surrounding U.S.-Canada trade negotiations are providing mixed signals for the pair.
Investors continue to assess the Bank of Canada’s (BoC) monetary policy stance, particularly after the central bank’s recent 25-basis-point rate cut to 2.75%, and its impact on the Canadian dollar (CAD).
USD/CAD price dynamics (Jan 2025 - Mar 2025) Source: TradingView.
USD/CAD consolidates amid Fed rate expectations
The Federal Reserve’s expected rate cuts remain a crucial factor in determining USD’s trajectory. With inflation showing signs of easing and labor market conditions cooling, markets anticipate multiple rate reductions in 2025. While this outlook keeps the greenback under pressure, USD has remained relatively resilient, supported by safe-haven demand amid persistent U.S. trade tensions.
For the Canadian dollar, the strength of commodity-linked assets like crude oil is a key factor. Rising oil prices typically support the loonie, limiting downside movements in USD/CAD. However, Canada’s trade and investment outlook remains uncertain, as businesses brace for the impact of shifting U.S. tariff policies.
Key support and resistance levels
USD/CAD has been oscillating in a narrow range, failing to sustain gains beyond $1.45. On the upside, immediate resistance is seen near 1.4470-1.4475, followed by the 1.45 mark. If buyers push through this zone, the next resistance stands at 1.4520, with a potential move toward 1.46 in a bullish scenario.
Conversely, a break below 1.44 could trigger a decline towards 1.4355-1.4350, a key short-term support. A breach of this level would open the door for a further drop towards 1.43 and the 1.4240-1.4235 monthly low. The 100-day Simple Moving Average (SMA) at 1.4215 is also a crucial long-term support level.
Market outlook and BoC’s policy direction
The BoC’s cautious rate-cut approach has kept markets on edge, with investors closely monitoring future policy decisions. The central bank has already cut rates by 225 basis points since June 2024, with markets pricing in another 50 basis points of easing by year-end. The uncertainty surrounding U.S. tariffs and their inflationary impact on the Canadian economy will continue to shape the BoC’s future rate trajectory.
The USD/CAD pair’s direction will depend on developments in U.S.-Canada trade relations, crude oil prices, and Fed rate-cut expectations. If U.S. economic data weakens further, pushing the Fed towards more aggressive easing, USD/CAD could see renewed downside pressure. On the other hand, if risk sentiment improves and U.S.-Canada trade talks yield positive results, the Canadian dollar may regain momentum against the greenback.
Also we discussed previously how the Canadian dollar held near 1.44 per USD, hovering close to the one-month low of 1.45 recorded on March 3.
This comes after Canada imposed 25% retaliatory tariffs on U.S. goods worth $21 billion, in response to Trump’s steel and aluminum duties. The Bank of Canada’s rate cut to 2.75% has helped cushion the economic slowdown, but shifting U.S. tariff policies and trade uncertainties continue to weigh on sentiment. Markets anticipate another 50 basis points of easing by year-end, with inflation projected to reach 2.5% in March, further influencing the BoC’s rate path.
