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The USD/CAD currency pair closed the week under pressure, as it extended the gradual downward trend that began in late 2025. Both currencies struggled to gain momentum, as the continued weakness of the US dollar persisted in the Forex markets. Meanwhile, the Canadian dollar was supported by stable domestic data. Instead of a sharp sell-off, the downside move was limited, as sellers still dominated but without any impetus.

The primary driver behind the pair has been the changing outlook for US monetary policy. The US dollar also finished 2025 on the steepest annual decline in eight years, and this weakness carried into the first full trading week of 2026.

Softer US labor data, coupled with rising expectations that the Federal Reserve will deliver at least two rate cuts this year, have weighed heavily on the greenback. Political uncertainty regarding the future leadership of the Fed has also contributed to investor caution, keeping dollar rallies short-lived.

The Bank of Canada has held a more moderate position on the Canadian side. Although rate cuts have been left on the table for a later time in 2026, officials have been cautious not to promise too much, especially when inflation rates are proving stubborn in some quarters.

This comparative political stability has helped curb the negativity in the Canadian dollar, despite some lingering global growth concerns. Oil prices have not skyrocketed, but they have remained steady enough to support the Loonie.

The previous week’s price action recorded the currency pair as reaching toward lower support but failing to break through decisively. The buyers have still been seen on dips, indicating that the market has remained wary of pursuing downside without further evidence that the US data will worsen. That indecision has seemingly kept the two in a slow grind instead of a precipitous fall.

The following week may be pivotal to the direction of the currency pair. Should US data support the story of decelerated growth and waning inflation tracts, the USD/CAD pair could finally breach through support and open the door to a further downward move. On the other hand, any positive surprise in the US, especially regarding inflation, could induce a corrective rebound, as positioning has been showing a more substantial imbalance against the dollar.

Canadian data will also be critical. Strong domestic releases may inspire Canadian dollar bulls, while economic weakness would likely rekindle downward risk on the currency and stabilize the USD/CAD exchange rate.

Major Events for the USD/CAD Pair Next Week

• US ISM Manufacturing PMI (Monday)
• US ISM Services PMI (Tuesday)
• ADP Employment and JOLTS Job Openings (Wednesday)
• Canada Employment Report (Friday)
• US NFP and Consumer Sentiment (Friday)

USD/CAD Weekly Technical Forecast: Corrective Upside Under 20-DMA
 

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USD/CAD daily chart

The daily chart for the USD/CAD pair shows a corrective upside formation as profit-taking occurred due to the oversold RSI. However, the price has remained well below the 20-day MA at the 1.3765 mark, while multiple MA crossovers may suggest room for more downside.

The upside could be capped by the 200-day MA near the 1.3860 level, while the downside target could be seen at the demand zone near 1.3550. The indicators seem to suggest that the path of least resistance lies on the downside.

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