Image Source: Unsplash

The USD/CAD currency pair's weekly forecast illustrates the fragility of the Canadian dollar as tariffs continue to reshape the outlook for the economy.

Ups and Downs of the USD/CAD Pair

The USD/CAD pair's price experienced a rather bullish week as the dollar gained after hotter-than-expected wholesale inflation figures. Initially, the loonie strengthened after US consumer inflation came in slightly softer than expected. Fed rate cut bets soared, and the dollar collapsed against most of its peers. However, this changed on Thursday when PPI numbers beat estimates. 

Moreover, the Canadian dollar has remained fragile since Trump imposed higher tariffs on Canada. Already, employment has slowed as companies anticipate the future. The tariffs might undo some of the work the BoC has done by lowering interest rates. Therefore, it might pressure policymakers to consider more rate cuts. 

Next Week’s Key Events for the USD/CAD

(Click on image to enlarge)

Next week, market participants will focus on crucial inflation and retail sales data from Canada. Meanwhile, the US is set to release the FOMC minutes, showing what went into the last meeting. Additionally, traders will likely pay close attention to the Jackson Hole Symposium where several policymakers will be speaking.

Canada’s inflation report will shape the potential outlook for the Bank of Canada's rate cuts. If inflation remains cool, the central bank might continue its pause. However, with Trump’s tariffs, policymakers might be forced to focus more on growth.

USD/CAD Weekly Technical Forecast: Looking to Rally after Range Breakout

(Click on image to enlarge)

USD/CAD daily chart

On the technical side, the USD/CAD pair's price appears to be bouncing higher after retesting a major support zone. The zone comprises of the 1.3750 level and the 22-SMA. Moreover, the bullish bias is strong as the price has been trading above the SMA with the RSI similarly above 50. 

Initially, the price paused to trade in a sideways range between the 1.3575 support level and the 1.3750 resistance level. Here, the previous downtrend stopped, and the RSI made a bullish divergence, confirming that bearish momentum was fading. As a result, bulls had a chance to take control.

The price broke out of its consolidation with bulls in the lead. Moreover, it pulled back to retest the recently broken range resistance and the 22-SMA. To confirm a new uptrend, bulls must now start making higher highs and lows. Therefore, the price might retest the 1.4000 key resistance level.

More By This Author:

AUD/USD Forecast: Breather For RBA Amid Upbeat Jobs
GBP/USD Price Analysis: Sep Cut On The Table As US Inflation Cools
AUD/USD Price Analysis: RBA To Extend Easing Cycle