USD/CAD Price Forecast: Rally extends beyond 1.4200 on US Dollar’s continued outperformance
- USD/CAD refreshes yearly high at around 1.4225 as the US Dollar trades firmly.
- The Fed’s next interest rate move is expected to be on the upside.
- Investors await the US PCE inflation data for fresh cues on the interest rate outlook.
The USD/CAD pair posts a fresh over-a-year high at around 1.4225 during the European trading session on Wednesday. The Loonie pair trades firmly as the US Dollar (USD) continues to outperform due to firm expectations that the next monetary policy adjustment by the Federal Reserve (Fed) will be on the upside.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.89% | 0.02% | 0.21% | 0.39% | 1.48% | 1.43% | 0.49% | |
| EUR | -0.89% | -0.86% | -0.59% | -0.45% | 0.64% | 0.48% | -0.38% | |
| GBP | -0.02% | 0.86% | 0.02% | 0.37% | 1.44% | 1.34% | 0.45% | |
| JPY | -0.21% | 0.59% | -0.02% | 0.12% | 1.23% | 1.18% | 0.21% | |
| CAD | -0.39% | 0.45% | -0.37% | -0.12% | 1.09% | 1.06% | 0.07% | |
| AUD | -1.48% | -0.64% | -1.44% | -1.23% | -1.09% | -0.08% | -0.97% | |
| NZD | -1.43% | -0.48% | -1.34% | -1.18% | -1.06% | 0.08% | -0.90% | |
| CHF | -0.49% | 0.38% | -0.45% | -0.21% | -0.07% | 0.97% | 0.90% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.1% higher to near 101.50, the highest level seen in over a year.
According to the CME FedWatch tool, the odds of the Fed hiking interest rates this year are almost 86%. While the possibility of at least two interest rate hikes is 48.3%.
Fed’s monetary policy meeting announced last week also showed that nine out of 19 policymakers supported the view of an interest rate hike this year.
Meanwhile, investors await the US Personal Consumption Expenditure Price Index (PCE) data for May, which will be released on Thursday. Investors will pay close attention to the US PCE inflation data to get fresh cues regarding the Fed’s monetary policy outlook.
USD/CAD technical analysis
USD/CAD trades higher at around 1.4224 at press time. The pair holds a constructive bullish bias as it trades above the 10-week exponential moving average (EMA) at 1.3943, suggesting the broader uptrend remains intact.
The Relative Strength Index (RSI) stands near 67, flirting with overbought territory and hinting that upside momentum is strong but vulnerable to a corrective pause if buyers start to lock in gains.
On the downside, the November 2025 high at 1.4140 will be the major support level, followed by the 10-week EMA at 1.3943. Looking up, the pair could extend its advance towards the 7 April 2025 high at 1.4296, followed by the April 2025 high at 1.4415.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
