USD/CAD Forecast: Canadian Dollar Unfazed by CPI as Trump Tariffs Loom

Canadian Dollar Outlook: USD/CAD

USD/CAD seems to be unfazed by the rise in Canada’s Consumer Price Index (CPI) as it registers a fresh weekly high (1.4213), and the exchange rate may further retrace the decline from the monthly high (1.4793) as US President Donald Trump pursues reciprocal trade and tariffs.

USD/CAD Forecast: Canadian Dollar Unfazed by CPI as Trump Tariffs Loom

Keep in mind, USD/CAD holds below the 50-Day SMA (1.4340) after closing below the moving average for the first time since October, and the exchange rate may continue to give back the advance following the US election should it struggle to defend the December low (1.3991).

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Nevertheless, the ongoing shift in US trade policy may influence USD/CAD as the Trump Administration promotes a ‘Golden Age of America,’ and it remains to be seen if the Bank of Canada (BoC) will respond to the looming tariffs as Canada’s CPI climbs to 1.9% in January from 1.8% per annum the month prior.

At the same time, the core CPI widened to 2.1% from 1.8% during the same period, and signs of sticky inflation may push the BoC to the sidelines as the central bank acknowledges that ‘the cumulative reduction in the policy rate since last June is substantial.’

In turn, the BoC may keep Canada interest rates on hold at its next meeting on March 12, and speculation for a change in regime may keep USD/CAD under pressure as the central bank appears to be at or nearing the end of its rate-cutting cycle.

With that said, USD/CAD may no longer track the positive slope in the 50-Day SMA (1.4340) as it holds below the moving average, but the exchange rate may extend the rebound from the monthly low (1.4151) as it snaps the series of lower highs and lows from last week.

USD/CAD Price Chart – Daily

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

The recent decline in USD/CAD seems to be stalling as it no longer carves a series of lower highs and lows, with a close above the 1.4210 (78.6% Fibonacci extension) to 1.4270 (38.2% Fibonacci retracement) zone bringing the 1.4470 (23.6% Fibonacci retracement) to 1.4510 (23.6% Fibonacci extension) region on the radar.
Next area of interest comes in around 1.4600 (61.8% Fibonacci extension) to 1.4660 (38.2% Fibonacci extension), but failure to defend the monthly low (1.4151) may push USD/CAD towards 1.4110 (50% Fibonacci extension).
Next region of interest comes in around 1.3940 (61.8% Fibonacci retracement) to 1.4000 (62.8% Fibonacci extension), which incorporates the December low (1.3991), with a breach below 1.3850 (50% Fibonacci extension) opening up the November low (1.3821).

Additional Market Outlooks

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GBP/USD Clears January High After Closing Above 50-Day SMA

USD/JPY Pulls Back Ahead of Monthly High to Halt Three-Day Rally

AUD/USD Eyes January High Ahead of RBA Rate Decision

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

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