Canadian Dollar Forecast: USD/CAD Rebound Fizzles amid Trump Tariff Negotiations

Canadian Dollar Outlook: USD/CAD

USD/CAD holds within the opening range for April as the Trump administration starts to negotiate the reciprocal tariffs, but the rebound from the monthly low (1.4027) may turn out to be temporary as the Bank of Canada (BoC) appears to be on track to retain the current policy.

Canadian Dollar Forecast: USD/CAD Rebound Fizzles amid Trump Tariff Negotiations

Keep in mind, USD/CAD bounced back ahead of the December low (1.3991) to keep the Relative Strength Index (RSI) above 30, and the exchange rate may further retrace the decline from the monthly high (1.4415) as the shift in US trade policy clouds the economic outlook for Canada.

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In turn, the Canadian Dollar may face headwinds ahead of the BoC on meeting on April 16 as the central bank observes that ‘the pervasive uncertainty created by continuously changing US tariff threats is restraining consumers’ spending intentions and businesses’ plans to hire and invest,’ and the Governing Council may come under pressure to implement lower interest rates in order to prevent a recession.

However, the BoC may pause its rate-cutting cycle as the central bank warns that monetary policy cannot offset the impacts of a trade war,’ and more of the same from Governor Tiff Macklem and Co. may heighten the appeal of the Canadian Dollar should the central bank adopt a wait-and-see approach for monetary policy.

With that said, USD/CAD could face increased volatility ahead of Canada’s federal election on April 28 amid the ongoing adjustment in US trade policy, but the exchange rate may stage further attempts to test the December low (1.3991) as it no longer trades within the February range.

USD/CAD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/CAD Price on TradingView

The recent rebound in USD/CAD seems to have fizzled as it gives back the advance from the start of the week, and lack of momentum to trade/close back above the 1.4210 (78.6% Fibonacci extension) to 1.4270 (38.2% Fibonacci retracement) zone may push the exchange rate towards 1.4110 (50% Fibonacci retracement).
Failure to defend the monthly low (1.4027) brings the 1.3940 (61.8% Fibonacci retracement) to 1.4000 (61.8% Fibonacci extension) zone on the radar, with the next area of interest coming in around 1.3850 (50% Fibonacci extension).
At the same time USD/CAD may hold within the opening range for April but need a close above the 1.4210 (78.6% Fibonacci extension) to 1.4270 (38.2% Fibonacci retracement) zone to bring the monthly high (1.4415) on the radar.

Additional Market Outlooks

AUD/USD Selloff Persists as US Threatens Additional 50% Tariff for China

Euro Forecast: EUR/USD Completes Cup-and-Handle Formation

GBP/USD Pulls Back to Keep RSI Out of Overbought Zone

Canadian Dollar Forecast: USD/CAD Selloff Persists as PM Carney Pledges to Fight Trump Tariffs

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

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