- The USD/CAD weekly forecast remains bearish amid a weaker dollar after rate cuts.
- Steady oil prices continue to support the Canadian dollar, putting pressure on the USD/CAD.
- Next week’s inflation and jobs data are crucial for traders to watch, as any surprise could significantly impact the pair.
The USD/CAD closed the last week slightly lower, losing around 0.40%, near the mid-1.3700 area as the US-Canada macro divergence widened. The key catalyst was a subdued US dollar amid softening labor market indicators, including jobless claims and weaker private hiring, combined with improved risk sentiment.
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The markets responded to the Fed’s 25-basis-point easing, followed by dovish signals, reiterating the cooling labor market. Market participants now anticipate two more cuts by mid-year, which will weigh on US yields and drag the dollar lower across the board.
From Canada, the momentum is not booming, though; it continues to highlight relative stability. Recent data reveal steady employment and wage growth, encouraging the Bank of Canada to pause the easing. The BoC in the last meeting showed a data-dependent approach, revealing less urgency to signal aggressive easing. This contrasts with the Fed’s more accommodative stance, which widens the policy divergence and favors the CAD over the USD.
Meanwhile, oil prices, being a key driver of CAD, remain steady under the $60.0 mark, providing a tangible floor for the Canadian dollar. However, concerns about oversupply keep oil gains limited, with a risk of falling below the $50.0 mark in 2026. This could restrict the USD/CAD downside, pushing the pair into a consolidation phase.
Moving forward to the next week, the USD/CAD could see huge volatility as Canada’s CPI data is due. A strong inflation reading would reduce the odds of front-loaded BoC cuts, lending CAD a fresh boost. On the other hand, the US CPI remains a focal point for traders. A downside surprise could cement the case for the Fed’s earlier cuts into 2026. However, reflation could unwind some dovish bets, temporarily lifting the USD/CAD. Meanwhile, the US NFP data is also crucial to monitor, as the Fed has expressed concerns about the persistently deteriorating labor market conditions.
USD/CAD Key Releases Next Week:
- US NFP
- US CPI
- US Retail Sales
- US Jobless Claims
- Fed speeches
- Canada CPI
Overall, next week’s narrative hinges on whether incoming US data confirms a cooling economy. If so, USD/CAD could extend lower, but oil volatility and CPI prints remain the wildcards.
USD/CAD Weekly Technical Forecast: Bearish Crossovers and Oversold RSI
The USD/CAD is gradually heading towards a key support level at 1.3720, as the 100- and 200-day MAs, along with the 20- and 50-day MAs, have formed a bearish crossover. However, the RSI has reached the oversold zone, which could initiate the consolidation phase before any directional move.
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On the upside, significant resistance for the pair emerges around the 200-day MA near 1.3900. On breaching the level, bulls could aim to test the 50-day MA around 1.4000.
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