USD/CAD has declined to approximately 1.4400 following a four-day high of 1.4470. The drop is attributed to the underperformance of the US Dollar, reflecting concerns over the economic impact of President Trump’s tariff agenda.
The US Dollar Index reached around 103.35, marking its lowest point in four months. Concurrently, the Canadian Dollar has weakened amid the 25% tariffs imposed by Trump, although a one-month exemption exists under the USMCA.
Bank Of Canada Meeting Outlook
Market focus is shifting to the Bank of Canada’s upcoming monetary policy meeting, with analysts predicting a 25 basis point cut to 2.75%. USD/CAD remains above the 100-period Exponential Moving Average around 1.4200, indicating a bullish trend.
The Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a sideways movement. Potential upside movement beyond 1.4470 may target 1.4500 and 1.4595, while a drop below 1.4151 could expose the pair to lower levels.
The Canadian Dollar’s performance is influenced by various factors, including interest rates set by the Bank of Canada, oil prices, inflation levels, and macroeconomic data. Higher oil prices typically support the Canadian Dollar, whereas weak economic indicators may lead to a decline in its value.
The dip in USD/CAD from 1.4470 to around 1.4400 comes due to the US Dollar struggling, largely because traders are uneasy about what the tariff policies might mean for broader economic stability. With the dollar index slipping to its weakest point in four months, there’s a clear indication that investor sentiment is shifting.
At the same time, Canada’s currency isn’t exactly thriving either, given the weight of the 25% tariffs introduced by Trump. However, the temporary one-month exemption under the USMCA has softened some of the immediate pressure. This exemption adds a layer of uncertainty—whether it is extended or not will likely be a key driver moving forward.
Attention is now turning towards the Bank of Canada’s next interest rate decision, which many anticipate will lead to a 25 basis point cut, bringing the rate down to 2.75%. If this happens, it could weaken the Canadian Dollar further, though the response will depend on whether markets have already priced in such a move.
From a technical standpoint, the trend still leans to the upside, as the pair remains comfortably above the 100-period Exponential Moving Average at around 1.4200. More immediate movements are somewhat directionless, as highlighted by the Relative Strength Index fluctuating between 40.00 and 60.00. This suggests hesitation among traders, possibly as they wait for more clarity from the central bank meeting.
Should buyers regain control and push the pair beyond 1.4470, the next hurdles at 1.4500 and 1.4595 might come into view. However, if sentiment turns bearish and we see a move below 1.4151, the downside risk grows, potentially opening the door for further declines.
Factors Influencing The Canadian Dollar
What happens next depends on several factors. The Bank of Canada’s stance will be key, but external forces such as oil prices, inflation readings, and global economic data will also influence direction. Typically, when oil prices strengthen, the Canadian Dollar benefits. On the other hand, weak economic reports could dampen investor confidence, making it harder for the currency to find support.
