Photo by Michelle Spollen on Unsplash

The Canadian Dollar (CAD) caught a fresh bid on Friday, reclaiming some lost ground against the US Dollar (USD), although the Loonie still remains trapped near six-month lows against the Greenback. The possibility of tariff easing from the US sparked a fresh round of investor risk appetite to close out an otherwise middling week that saw the US Dollar broadly gain ground. Investor nerves continue to fray at the hands of brinkmanship politics and policy setting from the Trump administration, and traders are looking for any excuse to pare back on risk-off bets as the trade gets crowded.

Canadian Prime Minister Mark Carney declared this week that serious trade talks between Canada and multiple trading partners, including the US and China specifically, were underway in earnest. The announcement did little to sway CAD bidding momentum, but US President Donald Trump teased that he may be looking at easing China tariffs at some point in the future, causing an immediate wave of relief to wash through markets.

Daily digest market movers: Canadian Dollar finds relief amid easing Greenback flows

• The Canadian Dollar rose three-tenths of one percent against the US Dollar, paring back some of the week’s overall declines.
• The Loonie remains down slightly for the week, marking a fourth straight losing week against the Greenback.
• Canadian PM Mark Carney’s active trade negotiation announcement did little to assuage CAD concerns about the Canadian economic tipping over into a full-blown recession as US tariffs bite across a wide swath of Canadian industries.
• Donald Trump softballed the idea that China tariffs might not exist forever, prompting investors to pile back into risk bets and pare safe haven flows.
• Key Consumer Price Index (CPI) inflation data are due next week from both Canada and the US, on Tuesday and Friday, respectively.

Canadian Dollar price forecast

After spending much of the summer trading below both moving averages, USD/CAD broke above the 50-day Exponential Moving Average (EMA) in late July and has since built a steady series of higher highs and higher lows. The key development came earlier this month when the 50-day EMA crossed above the 200-day EMA, a signal often interpreted as a shift in medium-term momentum from bearish to bullish. That crossover, combined with the pair’s strong push above 1.40 last week, marked a clear change in tone.

However, the latest candles suggest that upward momentum may be pausing. The Relative Strength Index (RSI) has pulled back from near overbought territory, and Friday’s red candle shows sellers stepping in after the rally toward 1.4278. The pullback toward the 1.40 level will be an important test; if buyers defend this area, it could turn into a new support zone. A close back below 1.39 would weaken the recent bullish structure and raise the risk of a deeper retracement.

In short, USD/CAD’s medium-term outlook has improved, but the pair may need to consolidate gains before any attempt to extend higher.

USD/CAD daily chart

(Click on image to enlarge)

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