Photo by Michelle Spollen on Unsplash

The USD/CAD forecast shows intense pressure on the Canadian dollar as the August 1 tariff deadline looms large. Canada remains among the few major economies without a trade deal. Meanwhile, market participants are preparing for the BoC and Fed policy meetings.

Talks between Canada and the US have gone on for some time. However, there is still no trade deal. To make matters worse, other major economies like Japan and the EU have secured deals. Meanwhile, Canada could face tariffs of 35%. Such an outcome would hurt the loonie further as the levies would hurt the economy. The Prime Minister has acknowledged that there won’t be a deal with zero tariffs. However, the focus remains on the eventual size.

“The negotiations are at an intense phase. It’s a complex negotiation. We will only sign a deal that’s the right deal,” Carney said.

“It’s improbable that there will be deals without any tariffs at all,” he said when asked whether Canada would escape being hit. “But there is a question about the level, there are questions about the size of tariffs.”

Meanwhile, traders are expecting both the Fed and the BoC to pause. Therefore, the focus will be on the messaging about future moves. Meanwhile, data revealed a bigger-than-expected increase in US private employment, boosting the dollar.

USD/CAD key events today

• BoC policy meeting
• Fed policy meeting

USD/CAD technical forecast: Bulls approaching the 1.3800 key level 

(Click on image to enlarge)

USD/CAD 4-hour chart

On the technical side, the USD/CAD price has broken above the 1.3750 key resistance level. The move has solidified the bullish bias. At the same time, it has pushed the price further above the SMA, showing bulls have a solid lead. Meanwhile, the RSI trades in the overbought region, supporting strong bullish momentum.

Furthermore, after breaking above the resistance, the price pulled back to retest the level before making a higher high. This is a sign that the price might be ready to continue higher. However, bulls have maintained a solid rally without pulling back or pausing for breath. 

Therefore, there might be a pause at the next hurdle. USD/CAD might pause at the 1.3800 key level. Nevertheless, it might eventually break above to continue the rally.

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