USD/CAD Remains Vulnerable to Trump Trade Policy Ahead of Fed Meeting

US Dollar Outlook: USD/CAD

USD/CAD gives back the advance from earlier this week even as US President Donald Trump warns of the ‘tremendous deficit with Canada,’ and the exchange rate may trade below the 50-Day SMA (1.4239) for the first time since October should it fail to defend the monthly low (1.4261).

USD/CAD Remains Vulnerable to Trump Trade Policy Ahead of Fed Meeting

Keep in mind, USD/CAD spiked to a fresh monthly high (1.4517) earlier this week as the Trump administration considers a 25% tariff for Canada, but the exchange rate may consolidate over the remainder of the month should it no longer track the positive slope in the moving average.

Join David Song for the Weekly Fundamental Market Outlook webinar.

In turn, USD/CAD may struggle to retain the advance from the December low (1.3991) ahead of the Federal Reserve interest rate decision on January 29, and it remains to be seen if the change in fiscal policy will sway the central bank as President Trump insists that ‘we just want to be treated fairly with other nations’ while speaking to the World Economic Forum in Davos, Switzerland.

US Economic Calendar

Even though the Federal Open Market Committee (FOMC) is expected to keep US interest rates on hold at its first meeting for 2025, Fed officials may offer a dovish forward guidance as the ‘median participant projects that the appropriate level of the federal funds rate will be 3.9 percent’ at the end of this year.

In turn, more of the same from the FOMC may produce headwinds for the Greenback as the central bank pursues a neutral policy, but Chairman Jerome Powell and Co. may show a greater willingness to further combat inflation as the US economy shows little signs of a recession.

With that said, USD/CAD may continue to hold above the 50-Day SMA (1.4239) should the Fed adopt a less-dovish forward guidance, but the exchange rate may no longer track the positive slope in the moving average if it fails to defend the monthly low (1.4261).

USD/CAD Price Chart – Daily

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

USD/CAD may consolidate over the coming days as it halts a three-day advance, but a move below the 1.4280 (38.2% Fibonacci extension) to 1.4299 (April 2020 high) zone may lead to a test of the monthly low (1.4261).
Lack of momentum to hold above the 50-Day SMA (1.4239) may push USD/CAD towards the 1.4170 (23.6% Fibonacci extension) to 1.4210 (78.6% Fibonacci extension) region, but the exchange rate may continue to track the positive slope in the moving average should it hold above the monthly low (1.4261).
Need a move back above the 1.4460 (61.8% Fibonacci extension) to 1.4480 (100% Fibonacci extension) area to bring the monthly high (1.4517) on the radar, with the next region of interest coming in around 1.4590 (78.6% Fibonacci extension).

Additional Market Outlooks

Gold Price Rally Fizzles to Keep RSI Below Overbought Zone

AUD/USD Recovery Stalls Ahead of Monthly High

EUR/USD Pushes Above 50-Day SMA for First Time Since October

USD/JPY Slips to Fresh Monthly Low Ahead of BoJ Rate Decision

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.