- The USD/CAD outlook shows tariff fears outweighing the impact of economic data.
- The US economy recorded softer-than-expected job growth in February.
- Traders expect the Bank of Canada to deliver another rate cut.
The USD/CAD outlook shows tariff fears outweighing the impact of economic data. Despite downbeat employment data, the dollar strengthened against the Canadian dollar as traders feared the effects of Trump’s tariffs on Canada’s economy. At the same time, market participants expect another BoC rate cut this week.
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The loonie fluctuated last week amid uncertainty over Trump’s tariffs. At first, the currency plunged when the US president implemented a 25% tariff on Canadian goods. However, it rebounded when he suspended the duty for another month. The uncertainty has affected Canada’s outlook on the economy. Moreover, the ever-present risk of a trade war between Canada and the US has reduced risk appetite.
As a result, the loonie fell on Friday despite a rally in other currencies amid weak US data. The US economy recorded softer-than-expected job growth in February. At the same time, the unemployment rate increased from 4.0% to 4.1%. The greenback collapsed in the broader market as traders moved to price three Fed rate cuts this year. This week, the CPI and PPI reports will shape the outlook for rate cuts.
On the other hand, the Canadian economy recorded soft job growth. However, the unemployment rate came in below estimates. Meanwhile, traders expect the Bank of Canada to deliver another rate cut during Wednesday’s meeting.
USD/CAD key events today
Neither the US nor Canada will release any key report today. Therefore, market participants will keep digesting last week’s events.
USD/CAD technical outlook: Bulls gear up for a break above the SMA
On the technical side, the USD/CAD price has bounced off the 1.4301 support level and is testing the 30-SMA resistance. Although bulls have not yet broken above the SMA, the RSI trades above 50, indicating stronger bullish momentum. Therefore, USD/CAD might soon breach the 30-SMA resistance.
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If this happens, the price will be free to climb and retest the 1.4501 resistance level. A break above this level will make a higher high, continuing the previous bullish trend. This will allow USD/CAD to challenge the 1.4700 resistance level.
However, if 1.4501 holds firm, the price might fall back below the SMA to challenge the 1.4301 support level.
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