The USD/CAD pair trades inside Monday’s trading range around 1.4330 in Tuesday’s European session. The Loonie pair consolidates as investors await Federal Reserve (Fed) Chair Jerome Powell’s testimony before Congress at 15:00 GMT.

Investors will pay close attention to Fed Powell’s commentary to know for how long the Fed will keep interest rates unchanged in the range of 4.25%-4.50%. Strategists at Macquarie said, "Our updated view is for no change in the fed funds rate during 2025 with it likely to remain in the 4.25 to 4.5% range. Previously we had suggested there would be just one further 25 bps cut in either March or May."

Market participants believe that orders of 25% tariff imposition on imports of steel and aluminum by United States (US) President Donald Trump will be inflationary for the economy. Such a scenario will force Fed officials to maintain a status quo for longer.

Meanwhile, the outlook of the Canadian Dollar (CAD) remains bearish as Canada is expected to be the biggest casualty of Trump’s tariffs. Investors should note that Canada is the largest exporter of aluminum to the US.

On the economic front, investors will focus on the US Consumer Price Index (CPI) data for January, which will be released on Wednesday.

USD/CAD trades in a tight range of 1.4270-1.4380 from a week. The 50-period Exponential Moving Average (EMA) near 1.4365 continues to be a major barrier for the US Dollar bulls.

The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, which indicates a sideways trend.

A fresh upside move toward the round-level resistance of 1.4500 and the January 30 high of 1.4600 would appear after the pair breaks above the February 10 high of 1.4380.

In an alternate scenario, a downside move below the February 5 low of 1.4270 would drag the pair towards the December 10 high of 1.4195, followed by the December 11 low of 1.4120.

USD/CAD four-hour chart

(Click on image to enlarge)

More By This Author: