The USD/CAD weekly forecast indicates improving risk appetite amid easing tariff tensions that keep pressure on the dollar.

Ups and downs of USD/CAD 

The USD/CAD pair had a bearish week as the dollar dropped from its peaks due to easing tariff fears. At the start of the week, traders focused on Powell’s speech. The Fed Chair maintained his hawkish tone, saying there was no rush to lower borrowing costs. 

Meanwhile, data on Wednesday revealed that US consumer inflation rose by 0.5% in January, beating forecasts of 0.3%. The upbeat report led to declining Fed rate cut expectations, briefly boosting the dollar. However, reports that Trump’s reciprocal tariffs would not immediately boost risk appetite, hurt the US dollar. Furthermore, data on Friday revealed that US retail sales dropped more than expected.

Next week’s key events for USD/CAD

Next week, investors will monitor inflation and retail sales data from Canada. Meanwhile, the US will release the FOMC policy meeting minutes. Canada’s inflation reading will shape the outlook for Bank of Canada rate cuts. A bigger-than-expected number will lower bets for a rate cut, boosting the Canadian dollar. On the other hand, if inflation is softer than forecast, rate-cut bets will rise, hurting the loonie.

Meanwhile, the FOMC meeting minutes will show where policymakers stand on future rate cuts. 

USD/CAD weekly technical forecast: Bears find their footing below the 22-SMA

(Click on image to enlarge)

USD/CAD daily chart

On the technical side, the USD/CAD price has broken below the 1.4300 support level, pushing lower below the 22-SMA. The move comes after the price made a solid bearish engulfing candle, signaling a likely reversal. 

Previously, USD/CAD traded in a strong uptrend, making higher highs and lows and respecting the 22-SMA as support. However, bears started gaining on bulls after the price broke above the 1.4300 resistance level. The price started making bigger red candles and kept close to the 22-SMA. Still, bulls made one last attempt to stay in control by making a higher high. However, the RSI made a lower high, showing weaker bullish momentum. 

Therefore, bears overpowered bulls and reversed the trend, pushing the price below the 22-SMA. Bears are now eyeing the 1.4004 support level. A break below this level will strengthen the new bearish bias.

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