USD/CAD price struggles below $1.42 amid bearish momentum
USD/CAD remains under pressure due to BoC policy
The USD/CAD pair remains under pressure, trading around 1.4190 on Friday, as the currency pair continues its fourth consecutive session of declines. The daily chart reveals a falling wedge pattern, which is typically considered a bullish reversal signal, suggesting that an upward correction may be on the horizon.
The USD/CAD pair finds immediate support at 1.4160, which aligns with the lower boundary of the falling wedge. A breakdown below this level could expose the pair to further declines toward the psychological level of 1.41.
On the upside, initial resistance is located at the nine-day EMA of 1.4278, followed by the 14-day EMA at 1.4307. A decisive break above these levels would shift short-term sentiment, with the falling wedge’s upper boundary near 1.4330 serving as the next key resistance level.
USD/CAD price analysis (October 2024 - February 2025) Source: TradingView.
Market sentiment and BoC outlook
The Canadian dollar has strengthened past 1.43 per USD, extending its rebound from the 22-year low of 1.455 recorded on January 31st. A key driver of this recovery has been a less dovish stance from the Bank of Canada (BoC). The latest BoC meeting minutes reflected concerns about U.S. tariff uncertainty and its impact on business investment and inflation. Consequently, policymakers refrained from providing forward guidance on interest rates, signaling caution in future monetary policy decisions.
Additionally, the Canadian dollar has benefited from a strong labor market, with unemployment falling to 6.6% in January. This has eased concerns about economic weakness and reduced expectations for near-term rate cuts. However, ongoing U.S. tariff threats, including a 25% levy on steel and aluminum, continue to pose risks for the currency. Prime Minister Justin Trudeau's efforts to secure temporary exemptions from these tariffs have helped stabilize the loonie for now.
Outlook: Potential upside if wedge breakout occurs
The USD/CAD remains at a crucial technical level, with the falling wedge pattern indicating the possibility of a bullish reversal. However, the pair will need to break above the 1.4278 resistance level to confirm this move. Until then, traders will closely watch developments surrounding US tariffs and Federal Reserve policy signals, which could influence further movements in the USD/CAD pair.
In prior discussions, we highlighted the Canadian dollar’s resilience amid U.S. economic uncertainty. The BoC’s cautious approach and tariff-related risks continue to be the primary market drivers.
