USD/CAD Price Forecast: Seems poised to reclaim 1.4100 and test multi-year peak

The USD/CAD pair gains strong positive traction at the start of a new week, snapping a three-day losing streak and stalling the recent corrective pullback from the 1.4175-1.4180 area, or the highest level since April 2020 touched last Tuesday. US President Donald Trump's pledged tariffs against America’s three biggest trading partners – Canada, Mexico and China – continue to weigh on the Canadian Dollar (CAD). This, along with resurgent US Dollar (USD) demand, turns out to be another factor lending some support to the currency pair. 

In a critical post over the weekend, Trump threatened a 100% tariff on the so-called 'BRICS' nations – Brazil, Russia, India, China,  and South Africa – if they replace the USD with another currency for international transactions. This, in turn, fueled speculations that Trump's tariff plans would reignite inflationary pressures and might force the Federal Reserve (Fed) to stop cutting rates or possibly raise them again. The prospects for a less aggressive policy easing by the Fed trigger a fresh leg up in the US Treasury bond yields and revive the USD demand. 

Adding to this, the cautious market mood further benefits the safe-haven Greenback and remains supportive of the strong bid tone surrounding the USD/CAD pair. The strong intraday move up, meanwhile, seems rather unaffected by an uptick in Crude Oil prices, which tends to underpin demand for the commodity-linked Loonie. Even reduced bets for a bigger rate cut by the Bank of Canada (BoC) in December does little to hinder the pair's intraday bullish momentum. This, in turn, suggests that the path of least resistance for the currency pair remains to the upside. 

Traders, however, might refrain from placing aggressive directional bets and opt to move to the sidelines ahead of important US macro data scheduled at the beginning of a new month. This week's rather busy US economic docket kicks off with the release of the ISM Manufacturing PMI, though the focus remains on the US Nonfarm Payrolls (NFP) report on Friday. The crucial jobs data will be scrutinized for cues about the Fed's rate-cut path. This, in turn, will play a key role in influencing the USD and provide a fresh directional impetus to the USD/CAD pair.

Technical Outlook

From a technical perspective, bullish oscillators on the daily chart validate the near-term positive outlook and support prospects for additional gains. Hence, some follow-through buying should allow spot prices to reclaim the 1.4100 mark. The momentum could eventually lift the USD/CAD pair to the multi-month top, around the 1.4175-1.4180 region, en route to the 1.4200 round figure, the 1.4265 region and the 1.4300 neighborhood, or April 2020 swing high. 

On the flip side, the 1.4000 psychological mark now seems to protect the immediate downside ahead of a multi-day low, around the 1.3980 region touched on Friday. Failure to defend the said support levels might prompt some technical selling and pave the way for an extension of the recent pullback from a multi-year peak. The USD/CAD pair might then fall to the 1.3955 support en route to the 1.3925 region or last week's swing low. This is followed by the 1.3900 mark, which if broken could drag spot prices to the November trough, around the 1.3820-1.3815 zone.

USD/CAD daily chart