USD/CAD Price Forecast: Strives to break above 1.3800 on BoC dovish bets

USD/CAD aims to break above 1.3800 as investors expect the BoC to cut interest rates by 50 bps on Wednesday.
The Canadian economy needs more stimulus to uplift overall demand and job growth.
The US Dollar struggles to extend its upside as investors look for fresh cues about the Fed’s interest rate outlook.

Sagar Dua FXStreet

The USD/CAD pair gathers strength to break above the immediate resistance of 1.3800 in Friday’s North American session. The Loonie pair remains firm as the Canadian Dollar (CAD) weakens on expectations that the Bank of Canada (BoC) could announce a super-size interest rate cut of 50 basis points (bps) in its monetary policy meeting on Wednesday.

Sliding price pressures and a sharp weakness in labor growth and household spending have prompted expectations of BoC larger-than-usual rate cuts. The BoC has already reduced its key borrowing rates by 75 basis points (bps) to 4.25% this year. This would be the fourth consecutive interest rate cut by the BoC in a row. Canada’s Consumer Price Index (CPI) slid to 1.6% in September, lower than the bank’s target of 2%.

Meanwhile, an eight-day winning streak in the US Dollar (USD) appears to have paused as investors look for fresh cues about the Federal Reserve’s (Fed) likely interest rate action in the remainder of the year. Currently, financial market participants expect the Fed to cut interest rates further by 25 bps in both November and December.

USD/CAD witnessed strong buying interest after a Double Bottom formation near 1.3440 on a daily timeframe. The bullish reversal formation got the green signal after a breakout above the September 19 high around 1.3650.

The near-term outlook of the Loonie pair has strengthened further as the 20- and 50-day Exponential Moving Averages (EMAs) deliver a bull cross near 1.3600.

The 14-day Relative Strength Index (RSI) shifts into the bullish range of 60.00-80.00, pointing to an active momentum.

More upside towards April 16 high of 1.3846 and Year-To-Date (YTD) high of 1.3945 would appear if the pair decisively breaks above the round-level resistance of 1.3800.

In an alternate scenario, a downside move below the September 19 high around 1.3650 will expose the asset to May 16 low near 1.3600, followed by September 13 high of 1.3538.

USD/CAD daily chart

(The story was corrected at 14:42 GMT on Friday to say in the first bullet that USD/CAD aims to break above 1.3800 as investors expect the BoC to cut interest rates by 50 bps on Wednesday, not the Fed)

Economic Indicator

BoC Interest Rate Decision

The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.

AUD/USD eyes 0.7150 barrier nine-day EMA

AUD/USD inches higher after registering modest losses in the previous day, trading around 0.7130 during the Asian hours. The technical analysis of the daily chart indicates that the pair is moving sideways within the rectangle pattern, suggesting a consolidation as neither the bulls nor the bears have enough momentum to take control of the market.

USD/JPY trades below 160.00 intervention threshold; bullish bias intact

The USD/JPY pair attracts some sellers during the Asian session amid fears that authorities will step in again to prop up the Japanese Yen. Furthermore, the Israel-Lebanon truce prompts some profit-taking around the US Dollar and exerts downward pressure on the currency pair.

Gold meets contention near $4,420…for now

Gold extends its recovery past the $4,500 mark per troy ounce on Thursday. The yellow metal’s advance comes amid the resurgence of some selling interest around the, improving risk sentiment, and declining US Treasury yields across the curve.

Bitcoin’s massive storm is back: Why the sell-off is far from over

Bitcoin price action over the last few weeks has felt less like a normal, healthy correction and more like a slow grinding crash that continues to wreak havoc on holdings and trading accounts. And everything suggests that the dramatic crash isn’t over.

Nonfarm payrolls: Testing the limits of Fed policy patience

The upcoming nonfarm payrolls report for May will provide the final update on the US labor market before Kevin Warsh attends his first policy meeting as the new Fed Chair later this month.

Recession on paper: What really moves the Canadian Loonie now?

Statistics Canada handed the headline writers a gift and the analysts a headache. Real GDP shrank 0.1% on an annualized basis in the first quarter, and with the fourth quarter of 2025 revised down to a 1.0% contraction, that is two negative quarters in a row, the textbook definition of a technical recession and Canada's first since the pandemic.