USD/CAD Price Forecast: Ascending channel favors bulls; key US macro data awaited

The USD/CAD pair regains positive traction on Friday and climbs to the 1.3700 mark during the early European session, back closer to a nearly two-week high, touched the previous day. The intraday move up is sponsored by the prevailing short-term bullish sentiment surrounding the US Dollar (USD). Apart from this, a modest pullback in Crude Oil prices undermines the commodity-linked Loonie, lending additional support to the currency pair. Traders, however, might refrain from placing fresh directional bets ahead of the key US macro releases for a fresh impetus later during the North American session.

The Advance US Q4 GDP report, along with the US Personal Consumption Expenditure (PCE) Price Index, will be published later today and looked upon for more cues about the Federal Reserve's (Fed) rate cut path. The outlook, in turn, will play a key role in driving the US Dollar (USD) demand in the near-term and provide some meaningful impetus to the USD/CAD pair. In the meantime, reduced bets for more aggressive policy easing by the US central bank, along with rising geopolitical tensions, assist the safe-haven Greenback to retain a positive bias and stand firm near its highest level since January 23.

Minutes from the January FOMC monetary policy meeting released on Wednesday showed that the central bank is in no hurry to cut interest rates further, while officials also discussed the possibility of raising rates if inflation does not cool. Adding to this, the incoming data, including the blowout January Nonfarm Payrolls (NFP) report and the Weekly Initial Jobless Claims,  signaled a remarkably resilient US labor market. Moreover, hawkish comments from Fed officials forced investors to reprice the expected rate trajectory. This has been a key factor behind the USD's recent rise and favors the USD/CAD bulls.

Meanwhile, escalating US-Iran tensions fueled fears of supply disruptions in the Middle East and pushed Crude Oil prices to the highest level since August 4. In fact, US President Donald Trump warned Iran on Thursday that it must make a deal over its nuclear program, or really bad things will happen, and set a deadline of 10 to 15 days. In response, Iran told UN Secretary General Antonio Guterres that it will not tolerate military aggression and that all bases and assets of a hostile force would be legitimate targets if attacked. This raises the risk of a military confrontation and a broader regional conflict.

This might continue to support Crude Oil prices, which, in turn, might hold back traders from placing aggressive bearish bets around the Canadian Dollar (CAD) and cap the USD/CAD pair. Nevertheless, spot prices remain on track to register strong weekly gains. However, diverging fundamental factors – geopolitical developments and Fed expectations – warrant some caution before positioning for an extension of a nearly two-week-old uptrend from the 1.3500 psychological mark.

USD/CAD 4-hour chart

Technical Analysis:

The recent move up witnessed over the past week or so has been along an upward-sloping channel, indicating a bullish trend. Moreover, the USD/CAD pair holds just above the 200-period exponential moving average at 1.3690, which has flattened after a gentle drift lower. A close back below it would weaken the near-term structure, while stability above keeps buyers engaged.

Meanwhile, the Moving Average Convergence Divergence (MACD) hovers around the zero line, with the MACD line aligned with the Signal line and a muted histogram, reinforcing a neutral tone. However, the Relative Strength Index (RSI) at 59 is positive but not overbought, suggesting room for measured follow-through.

Within the ascending channel from 1.3538, resistance aligns near 1.3713, where initial supply could emerge; a clear push above that barrier could extend the advance. The ascending channel supports the broader bias, with support near 1.3631, where buyers could reassert control on dips. Until momentum improves, upside traction could stay contained.

A stronger signal would be the MACD line extending above the Signal line in positive territory with a widening histogram. RSI holding in the upper 50s underpins dip-buying, while a slide toward 50 would put 1.3631 in focus; failure there would tilt risks toward a corrective phase within the channel.

(The technical analysis of this story was written with the help of an AI tool.)