USD/CAD Price Forecast: Bulls retain control amid rising trade tensions, ahead of US CPI/BoC

The USD/CAD pair regains positive traction on Wednesday following the previous day's good two-way price swings and seems poised to climb further amid the escalating US-Canada trade war. US President Donald Trump upped the ante and said on Tuesday that he would double planned tariff increases on steel and aluminum coming from Canada to 50%. Trump, however, reversed course after Ontario Premier Doug Ford suspended a 25% surcharge on electricity exports to the US. The White House then announced that only the previously planned 25% tariffs on metal imports, with no exceptions or exemptions, will go into effect for Canada and all of our other trading partners at midnight, March 12th

Doug Ford, along with federal Finance Minister Dominic LeBlanc, will meet with US Commerce Secretary Howard Lutnick in Washington on Thursday to discuss a renewed trilateral trade deal with the US and Mexico. Nevertheless, concerns about the potential fallout from Trump's trade tariffs lift market bets that the Bank of Canada (BoC) would continue its easing campaign to support the economy. This, along with the recent slump in Crude Oil prices, to the lowest level since May 2023, undermines the commodity-linked Loonie and acts as a tailwind for the USD/CAD pair. Apart from this, a modest US Dollar (USD) recovery from a multi-month low touched on Tuesday lends support to the currency pair. 

The USD uptick could be attributed to some repositioning trade ahead of the release of the latest US consumer inflation figures, due later during the North American session. The key US Consumer Price Index (CPI) report will influence expectations about the Federal Reserve's (Fed) rate-cut path, which, in turn, will provide a fresh impetus to the USD. Apart from this, the crucial BoC policy decision should assist investors in determining the next leg of a directional move for the USD/CAD pair. Heading into the key data and central bank event risks, bets that the Fed will cut interest rates several times this year amid a tariff-driven US economic slowdown and signs of a cooling US labor market might cap the USD. 

Furthermore, a positive turnaround in the global risk sentiment might hold back traders from placing aggressive bullish bets around the safe-haven buck and contribute to capping the USD/CAD pair. The lower house of Congress narrowly passed a Republican spending bill that would avoid a government shutdown on March 14 and keep the US government open until September. The bill now heads to the Senate and will need the support of at least seven Democrats to overcome the 60-vote filibuster threshold before Trump's signature. Adding to this, the optimism led by Ukraine's readiness to accept the US proposal for an interim 30-day ceasefire with Russia further boosts investors' confidence. 

USD/CAD daily chart

Technical Outlook

From a technical perspective, positive oscillators on the daily chart support prospects for a further near-term appreciating move. However, the recent repeated failures to find acceptance above the 1.4500 psychological mark warrant some caution and make it prudent to wait for a sustained strength beyond the said handle before positioning for further gains. The USD/CAD pair might then aim to test the monthly swing high, around the 1.4540-1.4545 region. Some follow-through buying should allow spot prices to reclaim the 1.4600 round figure and climb further toward the 1.4670 region en route to the 1.4700 mark. The momentum could extend further towards the 1.4800 neighborhood, or the highest level since April 2003 touched last month.

On the flip side, weakness below the 1.4400 round figure is likely to find some support near the overnight swing low, around the 1.4380-1.4375 region. A convincing break below the latter could drag the USD/CAD pair further towards the 1.4300 mark en route to the monthly swing low, around the 1.4240-1.4235 region. This is followed by the 100-day Simple Moving Average (SMA), currently pegged near the 1.4215 area, which if broken decisively might shift the bias in favor of bearish traders. Spot prices might then weaken further below the 1.4200 mark and test the year-to-date low, around the 1.4150 region set on February 14, before eventually dropping to the 1.4100 round figure.