- The US Dollar’s recovery on tariff talk is causing the USD/CAD pair to bounce.
- The main events to watch out for this week are the US PCE data and Canadian GDP for Q4.
- A close above 1.43100 on the daily candle chart would signal a structural shift that could empower bulls.
USD/CAD has enjoyed a bounce to start the week as the US Dollar eyes a recovery. The pair has been caught in a tight range since February 14 but does appear to be consolidating ahead of a potential breakout.
President Trump’s Tariff Pledge
US President Donald Trump announced yesterday that tariffs for Canada and Mexico would go ahead on March 3. This message lent support to the US Dollar and allowed USD/CAD to record another bullish day.
Given that approximately 75% of Canadian exports head to the US, tariffs and a potential tit-for-tat trade war may prove detrimental to the Canadian economy.
Bank of Canada Awaits Tariff Confirmation
Bank of Canada Governor Macklem recently acknowledged that tariffs have added to uncertainty.
Depending on how the tariff scenarios develop it could impact the decision by the Bank of Canada (BoC) on March 12, 2025, as pressure from consumers continues to mount. Tariff developments may also prove to be a key driver for the pair this week as the deadline approaches. Keep an eye out for any comments or more details from both US and Canadian officials.
The Week Ahead – US & Canada
The economic calendar is full this week with a lot of US data and Federal Reserve policymakers speaking. Today, we have housing starts data before we focus on comments from Federal Reserve policymakers Barr and Logan.
The main data events affecting USD/CAD will be released on Friday with Canadian GDP for Q4 before attention shifts to the much anticipated PCE data release from the US.
Technical Analysis and Outlook
USD/CAD had been stuck in a range for nearly a month now as the price continued its grand higher yesterday.
Overall, on a daily timeframe, the trend remains bearish which is supported by the 14-period SMA which remains below the 50 level, a sign that bearish momentum remains in play. A daily candle close above 1.43100 will lead to a shift in structure and could embolden bulls.
USD/CAD Daily Chart, February 25, 2025
Source: TradingView
Dropping down to an H4 chart, and as you can see price bottomed out on February 14, printing a series of higher highs and higher lows.
However, my concern is with the two moving averages resting at 1.4285 and 1.4340 which could cap any move to the upside.
USD/CAD Four-Hour Chart, February 25, 2025
Source: TradingView
Support
- 1.4172
- 1.4000
- 1.3956
Resistance
- 1.4310
- 1.4500
- 1.4594