Canadian Dollar Forecast: USD/CAD Rally Persists with Trump Tariffs on Track

Canadian Dollar Outlook: USD/CAD

USD/CAD stages a seven-day rally as US President Donald Trump states that the 25% tariffs for Canada will go into effect on March 4, with the reciprocal tariffs scheduled for April 2.

Canadian Dollar Forecast: USD/CAD Rally Persists with Trump Tariffs on Track

USD/CAD may further retrace the decline from the February high (1.4793) as the transition in US trade policy puts pressure on the Bank of Canada (BoC) to pursue an accommodative stance, and the central bank may overshoot the neutral rate amid the rising threat of a trade war.

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In turn, the Canadian Dollar may face headwinds ahead of the next BoC meeting on March 12 as Governor Tiff Macklem and Co. acknowledge that ‘a protracted trade conflict would most likely lead to weaker GDP,’ and the central bank may keep the door open to implement lower interest rates in 2025 in an effort to prevent a recession.

With that said, a further advance in USD/CAD may push the Relative Strength Index (RSI) into overbought territory for the first time since December, but the exchange rate trade within the February range should it track the flattening slope in the 50-Day SMA (1.4351).

USD/CAD Price Chart – Daily

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

• USD/CAD stages a seven-day rally for the first time since October to climb back above the 1.4470 (23.6% Fibonacci retracement) to 1.4510 (23.6% Fibonacci extension) region, with a move above 70 in the Relative Strength Index (RSI) likely to be accompanied by a further advance in the exchange rate like the price action from last year.
• Need a break/close above the 1.4600 (61.8% Fibonacci extension) to 1.4660 (38.2% Fibonacci extension) zone bringing the February high (1.4793) on the radar, with a close above 1.4790 (50% Fibonacci extension) opening up 1.4910 (61.8% Fibonacci extension).
• However, lack of momentum to hold above the 1.4470 (23.6% Fibonacci retracement) to 1.4510 (23.6% Fibonacci extension) region may push USD/CAD back towards the 1.4210 (78.6% Fibonacci extension) to 1.4270 (38.2% Fibonacci retracement) zone, with the next area of interest coming in around the February low (1.4151).

Additional Market Outlooks

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GBP/USD Climbs to Fresh Monthly High to Approach Channel Resistance

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong