CFD Trading Rate US Dollar vs Canadian Dollar (USDCAD)

The Bank of Canada (BoC) announces monetary policy today, without releasing new economic projections. Economists at ING analyze USD/CAD outlook ahead of the meeting.

Cautious about a rebound in CAD in the near term

Economists at TD Securities discuss the Bank of Canada (BoC) Interest Rate Decision and its implications for the USD/CAD pair.

Base Case: Mildly Hawkish (65%)

Slightly Dovish: (30%)

Extremely Dovish (5%)

• USD/CAD loses ground near 1.3583 ahead of the BoC rate decision. 
• The pair maintains a bullish outlook unchanged as the pair is above the key EMA; RSI stands in bullish territory.
• The immediate resistance level will emerge at 1.3600; 1.3570 acts as an initial support level for the pair.

The USD/CAD pair remains capped under the 1.3500 barrier during the early European session on Wednesday. Market players await the Bank of Canada (BoC) interest rate decision and press conference later in the day. The Canadian central bank is widely expected to hold its key interest rate at 5.0% at its March meeting, and financial markets anticipate the first rate cut to come in around June. USD/CAD currently trades near 1.3583, down 0.08% on the day. 

According to the four-hour chart, USD/CAD keeps the bullish vibe unchanged as the pair is above 100-period Exponential Moving Averages (EMA). Additionally, the Relative Strength Index (RSI) stands in bullish territory above the 50.0 midlines, supporting the buyer for the time being. 

On the bright side, the immediate resistance level for USD/CAD will emerge near a high of February 6 and a psychological mark at 1.3600. The next hurdle is seen near a high of December 12 at 1.3618, en route to a high of November 27 at 1.3711. 

On the flip side, the confluence of the lower limit of the Bollinger Band and the 100-period EMA at 1.3570 acts as an initial support level for the pair. A bearish break below the latter will see a drop to a low of March 4 at 1.3545, followed by a low of February 26 at 1.3500. 

USD/CAD four-hour chart

• USD/CAD extends the rally to 1.3600 amid the rebound of USD. 
• BoC is expected to keep rates steady at 5% for the fifth time in a row. 
• The US ISM Services PMI came in at 52.6 in February vs. 53.4 prior, weaker than the expectation of 53.0.

 The USD/CAD pair edges higher to nearly 1.3600 during the early Asian trading hours on Wednesday. The Bank of Canada (BoC) will announce the interest rate decision later in the day, with no rate change expected. The pair currently trades near 1.3598, adding 0.03% on the day. 

The BoC will release its Monetary Policy Statement on Wednesday, and markets expect the Canadian central bank to keep rates steady at 5% for the fifth time in a row. Financial markets see just a 19% odds of a surprise rate cut on Wednesday at its March Italee policy meeting. Traders will take core cues from the press conference about the economic and inflation outlook.

On the USD’s front, Federal Reserve (Fed) Chair Powell’s testimony to the Senate Banking Committee on Wednesday will be a closely watched event. The dovish tone from Fed officials might exert some selling pressure on the Greenback and create a headwind for the USD/CAD pair. 

About the data, the US February ISM Services PMI declined to 52.6 from 53.4 in January, below the market consensus of 53.0. The New Orders Index improved to 56.1 from 55.0 in the previous reading. The Employment Index dropped to 48.0 versus 50.5 prior, and the Prices Paid Index declined to 58.6 from 64.0 in the previous reading. 

Moving on, traders will watch the BoC interest rate decision and the Fed Chair Powell’s testimony on Wednesday. The attention will shift to US labor market data on Friday. The US Nonfarm Payrolls is estimated to add 200,000 jobs in February, while the Unemployment Rate is forecast unchanged at 3.7%.

The Canadian Dollar (CAD) weakened in February and was the third worst performing G10 currency. Economists at MUFG Bank analyze Loonie’s outlook.

CAD near-term downside risks before recovery

• USD/CAD rises to three-month high around 1.3600 amid a dismal market mood.
• The US Dollar rebounds as Fed Powell is expected to deliver hawkish guidance on interest rates.
• Investors expected that the BoC will keep interest rates unchanged at 5% for straight fifth time.

The USD/CAD pair trades close to three-month high near 1.3600 in the late European session on Tuesday. The Loonie asset holds strength as the market mood is cautious ahead of Federal Reserve Chair Jerome Powell’s testimony before Congress on Wednesday and a packed United States economic calendar this week.

S&P 500 futures exhibit significant losses in the early American session, indicating a decline in the risk appetite of the market participants. The US Dollar is slightly bullish after closing in negative territory in the last two trading sessions. The US Dollar Index (DXY) is up 0.08%, around 103.90 ahead of the Fed Powell’s testimony.

Fed Powell is expected to maintain hawkish rhetoric amid less conviction over inflation returning to the 2% target. Powell may reiterate that there is no need of urgency for rate cuts.

But before that, investors will focus on the Institute of Supply Management (ISM) Services PMI for February, which will be published at 15:00 GMT. According to economists, the Services PMI representing the service sector, which accounts for two-third of the US economy is expected to drop to 53.0 from 53.4 in January.

Meanwhile, the Canadian Dollar will be guided by the interest rate decision from the Bank of Canada (BoC), which will be announced on Wednesday. The BoC is expected to hold interest rates at 5% for the fifth time in a row. Market participants will focus on the guidance about when the BoC will start reducing interest rates.

USD/CAD moves back to the 1.3600 area. Economists at Scotiabank analyze the pair’s outlook.

Support remains 1.3540/1.3550

See – USD/CAD: Loonie to weaken further before a turnaround in H2 – CIBC

The Loonie has not moved much in the last month, with USD/CAD bouncing around 1.3500. Economists at CIBC Capital Markets analyze the pair’s outlook.

USD/CAD to reach 1.2900 by the end of 2025

• USD/CAD could test the psychological resistance at 1.3600 on Monday.
• Technical analysis suggests a confirmation of the bullish trend for the pair.
• The key support area appears around the nine-day EMA at 1.3552 and the major support of 1.3550.

USD/CAD extends its winning streak for the second session on Tuesday amid a stable US Dollar (USD), which could be attributed to the risk aversion ahead of the key economic data from the United States (US). The USD/CAD pair inches higher to near 1.3590 during the Asian trading hours.

The technical analysis of the 14-day Relative Strength Index (RSI) is positioned above 50, suggesting bullish momentum for the USD/CAD pair to surpass the psychological resistance of 1.3600 following the major barrier of 1.3650.

Furthermore, the lagging indicator, Moving Average Convergence Divergence (MACD), indicates a confirmation of a bullish trend for the USD/CAD pair. This interpretation is based on the MACD line's position above the centerline and the signal line.

On the downside, the USD/CAD pair could find the key support region around the nine-day Exponential Moving Average (EMA) at 1.3552 aligned with the major support level of 1.3550. A break below this zone could prompt the pair to navigate the further support region around the 23.6% Fibonacci retracement level at 1.3505, in conjunction with the psychological level of 1.3500.

USD/CAD: Daily Chart

• USD/CAD remains flat around 1.3575 in Tuesday’s early Asian session. 
• Fed’s Bostic said there’s no urgency to cut interest rates given the US economy's strength. 
• The BoC is expected to hold rates at 5% at its June meeting on Wednesday.

The USD/CAD pair holds below the 1.3600 barrier during the early Asian trading hours on Tuesday. The Bank of Canada (BoC) will announce the interest rate decision on Wednesday, with no change in rate expected. Meanwhile, the decline in oil prices weighs on the Loonie and provides some support to the USD/CAD pair. At press time, the pair is trading at 1.3575, unchanged for the day. 

The Federal Reserve (Fed) is expected to maintain the benchmark interest rate in the 5.25% to 5.5% range at its March meeting. The financial market has priced in the first rate cuts in June, but this might change if inflation stalls or wages continue to beat forecasts. Fed President Raphael Bostic said on Monday that the central bank is under no urgent pressure to cut interest rates given a prospering economy and job market. 

On the other hand, the Bank of Canada (BoC) is widely expected to hold its key interest rate at 5.0% on Wednesday. Investors have priced an 80% odd that the first rate cut to come in around June. The press conference might offer some hints about the timing of rate cuts. Dovish remarks from the BoC governor could exert some selling pressure on the Canadian Dollar (CAD). 

Market players will focus on the US ISM Services PMI, which is estimated to ease from 53.4 in January to 53.0 in February. Later this week, Fed Chairman Jerome Powell’s Senate testimony will be a closely watched event ahead of the US Nonfarm Payrolls (NFP) on Friday. 

USD/CAD has been trading relatively stable around 1.3500 for several weeks. Economists at Commerzbank analyze the pair’s outlook.

Loonie unlikely to appreciate further against the USD in 2025

Source: Commerzbank Research

USD/CAD is little changed on the session so far. Economists at Scotiabank analyze the pair’s outlook.

Risks tilted mildly to the downside

• USD/CAD gains grounds on higher US Treasury yields.
• Fed’s Bostic anticipates that the first Fed rate cut around the end of this year.
• The higher WTI price could provide support for the Canadian Dollar.

USD/CAD improves higher to near 1.3570 during the European session on Monday amid a stable US Dollar (USD) with improved US Treasury yields. Atlanta Fed President Raphael W. Bostic has expressed his expectation that the first cut in interest rates would likely be appropriate, possibly occurring towards the end of this year at the earliest, which provides some support for the US Dollar (USD).

According to the CME FedWatch Tool, the probability of rate cuts in March stands at 5.0%, while the likelihood of cuts in May and June is estimated at 26.8% and 53.8%, respectively.

However, the US Dollar (USD) faced downward pressure following a subdued February’s manufacturing figures from the United States (US). The US ISM Manufacturing PMI for February dropped to 47.8 from 49.1, significantly missing the market expectation of 49.5 reading. Additionally, the Manufacturing New Orders Index decreased to 49.2 from the previous 52.5 reading.

However, Higher Crude oil prices might have supported the Canadian Dollar (CAD), consequently, putting a cap on the upside of the USD/CAD pair. West Texas Intermediate (WTI) oil price edges higher to near $79.70 per barrel, by the press time.

The increase in Crude oil prices followed the Organization of the Petroleum Exporting Countries and its allies (OPEC+) decision to extend voluntary oil output cuts, along with extended tensions between the Middle East.

Traders await the Bank of Canada’s (BoC) policy meeting scheduled on Wednesday. Market expectations suggest that the central bank will maintain its current interest rate at 5.0%.

• USD/CAD gains ground despite higher Crude oil prices.
• BoC is expected to maintain its current interest rate at 5.0%.
• WTI price appreciates on the OPEC+ decision to extend oil output cuts of 2.2M bpd.
• US Dollar consolidates amid improved US Treasury yields.

USD/CAD retraces recent losses, reaching higher to near 1.3560 during the Asian session on Monday. This retracement occurred despite higher Crude oil prices, which typically support the Canadian Dollar (CAD) due to Canada's status as a major oil exporter. This, in turn, could limit the advances of the USD/CAD pair.

West Texas Intermediate (WTI) oil price edges higher to near $79.50 per barrel on Monday. The increase in Crude oil prices followed the Organization of the Petroleum Exporting Countries and its allies (OPEC+) decision to extend voluntary oil output cuts of 2.2 million barrels per day (bpd) into the second quarter, aligning with market expectations.

Canada's S&P Global Manufacturing Purchasing Managers Index (PMI) experienced a slight improvement, rising to 49.7 from the previous 48.3, although it remained below the 50.0 threshold which indicates contraction in the sector.

Looking ahead, the Bank of Canada (BoC) is scheduled to announce its latest interest rate decision next Wednesday. Market expectations suggest that the central bank will maintain its current interest rate at 5.0%.

The US Dollar Index (DXY) hovers around 103.80, as it seeks direction amidst improved US Treasury yields. However, the US Dollar (USD) faced downward pressure due to the contraction observed in the United States manufacturing sector in February.

The US ISM Manufacturing PMI for February dropped to 47.8 from 49.1, significantly missing the market expectation of 49.5. Additionally, the US Michigan Consumer Sentiment Index declined to 76.9 in February, falling below the market expectation of remaining unchanged at 79.6.

Despite these concerning data points, Federal Reserve (Fed) officials have maintained a cautious stance and have not signaled any immediate interest rate cuts. This stance has provided some support for the US Dollar.

Investors are closely monitoring upcoming economic data releases, including the ISM Services PMI data, ADP Employment Change, and Nonfarm Payrolls for February, to gauge the overall health of the US economy and potential future monetary policy decisions by the US Federal Reserve.

• USD/CAD flubs 1.3600 once again.
• Canada Manufacturing PMI recovers but still in contraction.
• US ISM Manufacturing PMI declined, flaunting forecasts.

USD/CAD fumbled the 1.3600 handle on Friday after a worse-than-expected US ISM Manufacturing Purchasing Managers Index (PMI) for February unexpectedly declined. The US Dollar (USD) was dragged broadly lower, sending the USD/CAD pair back into familiar technical territory near 1.3550.

Canada saw a decline in its S&P Global Manufacturing PMI on Friday, but market attention was focused on the day’s key US data print. Next week brings the latest rate call from the Bank of Canada (BoC) slated for next Wednesday, and next week will wrap up with another US Nonfarm Payrolls (NFP) on Friday alongside Canadian labor figures.

Daily digest market movers: USD/CAD falls back into range after ISM PMI miss

• Canada’s S&P Global Manufacturing PMI for February printed at 49.7 compared to the previous 48.3, an improvement but still in contraction territory below 50.0.
• The US ISM Manufacturing PMI for February fell to 47.8 versus the forecasted uptick to 49.5 from 49.1.
• ISM Manufacturing PMI: declines to 47.8 in February vs. 49.5 expected.
• The University of Michigan Consumer Sentiment survey index also eased to 76.9 in February, down from the forecast of a hold at the previous 79.6.
• ISM Manufacturing Prices Paid also ticked lower to 52.5, down from the 53.0 forecast and the previous month’s 52.9.
• Easing data is sparking investor risk appetite as inflation figures up  odds of a Federal Reserve (Fed) rate cut.
• Fed’s Monetary Policy Report: Inflation expectations are broadly consistent with 2% goal

Technical analysis: USD/CAD drifts back into the bottom end of near-term congestion below 1.3600

USD/CAD fell from an intraday high near 1.3600 to retest 1.3550 on Friday as the pair continues to grapple with near-term consolidation. A heavy supply zone at the 1.3600 handle is keeping bullish momentum pinned.

Higher highs are keeping daily candlesticks on the bullish side, but USD/CAD continues to wrestle with the 200-day Simple Moving Average (SMA) at 1.3477. A lack of topside momentum could drag the pair back into consolidation at the long-term moving average if buyers can’t break the 1.3600 level decisively.

USD/CAD hourly chart

USD/CAD daily chart

There is a risk that the BoC will turn a notch more dovish at the March meeting. Thus, the Canadian Dollar (CAD) could come under pressure in the next week, economists at ING say.

Mixed data points to BoC’s holding pattern

USD/CAD trades little changed on the session. Economists at Scotiabank analyze the pair’s outlook. 

Further strength in commodity prices may give the CAD reason to improve

• USD/CAD loses ground as WTI oil price improves to near $78.10 during the Asian hours.
• Canadian Dollar might have received support on the upbeat Canadian GDP Annualized.
• CME FedWatch Tool suggests the probability of rate cuts in March is at 3.0%.

USD/CAD breaks the winning streak that began on February 23, which could be attributed to the improved Crude oil prices as Canada is the largest oil exporter to the United States (US). The pair edges lower to near 1.3560 during the Asian session on Friday.

Additionally, upbeat Canada’s Gross Domestic Product (GDP) Annualized might have provided some support to underpinning the Canadian Dollar (CAD). The data reported a growth of 1.0% in the fourth quarter of 2023. The market expectation was an increase of 0.8% against the previous decline of 0.5%. Moreover, GDP (QoQ) rose by 0.2% against the previous decline of 0.1%.

The West Texas Intermediate (WTI) oil price is showing improvement, nearing $78.10, as speculation arises regarding the potential extension of supply cuts by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) and ongoing tensions in the Middle East.

Recent data, including Gross Domestic Product (GDP) figures and the US Personal Consumption Expenditures - Price Index from the United States (US), has led to a postponement in market expectations for the Federal Reserve's (Fed) first-rate cut. This has provided support for the US Dollar (USD). Investors are now awaiting the final US S&P Global Manufacturing PMI for February, scheduled for release on Friday.

According to the CME FedWatch Tool, the probability of rate cuts in March is at 3.0%, with expectations decreasing to 23.1% in May and increasing to 52.2% in June. Atlanta Fed President Raphael W. Bostic commented that recent inflation data indicates a challenging path toward achieving the central bank's 2% inflation target. Moreover, Chicago Fed President Austan Dean Goolsbee anticipates the first-rate cuts later this year but refrained from specifying the exact timeline.

• USD/CAD softer on Thursday, moves are limited.
• Canada saw a mixed GDP print, and US jobless claims ticked higher.
• Friday to bring Canadian, US PMIs.

USD/CAD rose to an intraday high of 1.3597 before backsliding to 1.3541 after US Personal Consumption Expenditure Price Index (PCE) inflation figures printed exactly as markets were hoping. Annualized Canadian Gross Domestic Product (GDP) printed above expectations, but the MoM figure failed to meet expectations.

Canada still has the S&P Global Manufacturing Purchasing Manager Index (PMI) due on Friday, alongside the US S&P and ISM Manufacturing PMIs. Michigan State University’s Consumer Sentiment Index survey results are also slated for Friday. Several Federal Reserve (Fed) officials will be making appearances on Friday as well, and rate watchers will be keen to look for signs that Thursday’s PMI print drew rate cut interest from Fed policymakers.

Daily digest market movers: US PCE brings no surprises, mixed Canadian GDP limits moves

• US Core PCE printed at 2.8% YoY, exactly as expected, down slightly from previous 2.9%.
• The MoM Core PCE figure also printed at the expected 0.4%, but the previous print saw a slight downside revision to 0.1% from 0.2%.
• Canada’s Annualized Q4 GDP came in at 1.0%, above the 0.8% expected and posting a stronger recovery from the previous -0.5%, which also saw a healthy revision from -1.1%.
• US Initial Jobless Claims ticked higher for the week ended February 23, rising to 215K compared to the forecast for 210K, while the previous week saw a slight revision to 202K from 201K.
• US Pending Home Sales also declined to a five-month low, printing at -4.9% versus the forecast of 1.0%, a sharp pullback from the previous 5.7% (revised down from 8.3%).
• Friday brings the latest Canadian S&P Global Manufacturing PMI for February, which last printed at 48.3.
• Friday’s US ISM Manufacturing PMI is expected to tick slightly higher to 49.5 from 49.1 in February.

Technical analysis: USD/CAD still up on the week despite Thursday backstep

USD/CAD is trading into familiar near-term levels after falling toward 1.3540. The pair remains capped under the week’s high of 1.3606 set on Wednesday, and intraday price action is getting bolstered by the 200-hour Simple Moving Average (SMA) nearby at 1.3515.

Thursday’s daily candlestick is notably middling on the high side of recent consolidation. The pair is drifting away from the 200-day SMA at 1.3478 and is up over 3% from the last major swing low into the 1.3200 handle.

USD/CAD hourly chart

USD/CAD daily chart