- The USD/CAD forecast shows a brighter outlook for the global economy.
- Trump temporarily lowered reciprocal tariffs on most countries.
- Market participants are also looking forward to the US consumer inflation report.
The USD/CAD forecast shows a brighter outlook for the global economy after Trump paused some reciprocal tariffs. At the same time, Canada and Japan have agreed to cooperate with the Trump administration to maintain calm in the financial markets. As a result, the loonie rebounded sharply. However, the trade war between the US and China rages on, keeping a lid on risk appetite.
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Trump turned around late on Wednesday to temporarily lower reciprocal tariffs on most countries, boosting the Canadian dollar. At the same time, the dollar rebounded against safe-haven currencies. The sudden shift showed that the tariffs were mostly a negotiating tactic. However, the trade war between the US and China continues, clouding the outlook for both economies.
Moreover, Canada and Japan are among the countries that have decided to work with Trump to maintain peace and calm. This has eased concerns about Canada’s economy. At the same time, it has eased pressure on the Bank of Canada to lower borrowing costs in response to tariffs.
Market participants are also looking forward to the US consumer inflation report. An upbeat report will lower Fed rate cut expectations. On the other hand, a downbeat report might convince policymakers to cut rates faster. However, they might wait to see the impact of Trump’s tariffs on the economy.
USD/CAD key events today
- US core CPI m/m
- US CPI m/m
- US CPI y/y
- US unemployment claims
USD/CAD technical forecast: Bears aim for a new low below 1.4050
On the technical side, the USD/CAD price has dropped to retest the 1.4050 support level. The price trades well below the 30-SMA with the RSI near the oversold region, suggesting a strong bearish bias. However, bears are facing a solid hurdle at the 1.4050 support.
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Previously, when the price fell to this support, it reversed sharply to the 30-SMA. Although it broke above the resistance, bulls failed to sustain a move higher, allowing bears to resume the downtrend. However, if the 1.4050 support holds firm, bulls might return. Such an outcome could mean a consolidation between the 1.4050 support and the 1.4250 resistance. On the other hand, a break below 1.4050 will strengthen the bearish bias with a lower low.
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