USD/CAD Price Forecast: Bulls have the upper hand, breakout through short-term range awaited

The USD/CAD pair trades with a positive bias for the third straight day on Thursday, though it remains below the highest level sine March 2020 touched earlier this week. Crude Oil prices prolong the recent retracement slide from the highest level since July 2024 for the sixth straight day amid concerns that US President Donald Trump's proposed policies would impact global economic growth and fuel demand. Moreover, expectations that Trump's threatened 25% tariffs on imports from Canada would negatively impact the domestic currency and force the Bank of Canada (BoC) to cut interest rates aggressive undermine the commodity-linked Loonie. This, along with a modest US Dollar (USD) uptick, turn out to be key factors acting as a tailwind for the currency pair. 

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, attracts some follow-through buying and looks to build on the overnight bounce from the monthly low. That said, the growing acceptance that the Federal Reserve (Fed) will lower borrowing costs twice this year, which had been a key reason behind the recent decline in the US Treasury bond yields, should cap further appreciation for the buck and the USD/CAD pair. Investors now look forward to Trump's speech at the World Economic Forum for more concrete announcements on tariffs. Apart from this, the release of the usual US Weekly Initial Jobless Claims could provide some impetus and allow traders to grab short-term opportunities later during the North American session. 

Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices remains to the upside and any meaningful corrective decline could be seen as a buying opportunity. Furthermore, uncertainty surrounding Trump’s tariff plans, which could trigger trade wars, might continue to infuse volatility in the markets and act as a tailwind for the safe-haven Greenback. Apart from this, the bearish sentiment surrounding Crude Oil prices validates the near-term positive outlook for the USD/CAD pair.

USD/CAD daily chart

Technical Outlook

The USD/CAD pair has been oscillating in a familiar range over the past month or so. Against the backdrop of a strong move up from the September 2024 low, this might still be categorized as a bullish consolidation phase. Moreover, technical indicators on the daily chart – though have been losing traction – are still holding in positive territory. This validates the near-term constructive outlook for the USD/CAD pair. That said, any subsequent strength beyond the 1.4400 mark is likely to attract some sellers near the 1.4465-1.4470 supply zone. This is followed by the 1.4500 psychological mark and the 1.4515 area, or a multi-year peak, above which spot prices might aim to conquer the 1.4600 round figure.

On the flip side, weakness below the 1.4370-1.4365 immediate support could be seen as a buying opportunity near the 1.4335 zone, which, in turn, should help limit the downside near the 1.4300 mark. Some follow-through selling, leading to a further decline below the monthly swing low, around the 1.4260 area, could shift the bias in favor of bearish traders and pave the way for a deeper corrective decline.