- The USD/CAD outlook indicates unexpected strength in Canada’s economy.
- The outlook for Canada’s economy remains gloomy.
- PCE data revealed a decline in US consumer spending.
The USD/CAD outlook indicates unexpected strength in Canada’s economy that has paused the loonie’s recent decline. However, the outlook for the currency remains bleak as market participants expect Trump’s tariffs to start this month. On the other hand, the dollar eased slightly on Friday after data revealed weak consumer spending.
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Data on Friday revealed that Canada’s economy expanded by 2.6% annually, compared to estimates of 1.8%. The upbeat report showed recent BoC rate cuts had revived growth. At the same time, it stemmed declines in the loonie after Trump confirmed that his tariff on Canada would start this month.
However, the outlook for Canada’s economy remains gloomy since a 25% tariff will significantly hurt demand. Canada exports nearly 75% of its goods to the US. The tariff would pressure the Bank of Canada to lower interest rates further and support the economy. This, in turn, will be bearish for the Canadian dollar.
On the other hand, a response from Canada would likely lead to a trade war between the two nations that would hurt risk appetite.
The dollar paused its climb against the loonie after PCE data revealed a decline in US consumer spending. As a result, market participants are pricing a higher likelihood of a Fed rate cut in June.
USD/CAD key events today
USD/CAD technical outlook: Sharp bullish move halts at 0.5 Fib level
On the technical side, the USD/CAD price is in a strong, bullish move and has broken above the 1.4400 resistance level. It trades above the 30-SMA, and the RSI is near the overbought region, suggesting a solid bullish bias.
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However, bulls have met a solid hurdle at the 0.5 Fib retracement level. This might cause a pullback to the 30-SMA. Nevertheless, if bulls remain strong, the price will bounce off the SMA and break above the Fibonacci level to continue the uptrend. Moreover, bulls will have a clear path to the 1.4600 resistance level.
On the other hand, if the Fib level holds firm and the price breaks below the 30-SMA, it will indicate a bearish sentiment shift. This would allow USD/CAD to revisit the pivotal 1.4150 support level.
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