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Canadian Dollar Price Forecast: Is a Breakout Coming?

By January 30, 2025January 31st, 2025No Comments

The Canadian Dollar (CAD) has been losing ground against the US Dollar (USD) for three days straight, pushing USD/CAD back above 1.4400. This follows weeks of sideways movement, where the pair has been bouncing between 1.4300 and 1.4500 without a clear direction.

Key Levels to Watch

The 1.4500 mark is proving to be a tough resistance level for the Canadian Dollar. If USD/CAD moves above this level, we could see further gains for the US Dollar. On the other hand, if the pair drops below 1.4270, it may signal a shift toward lower prices for the USD/CAD.

What’s Pressuring the Canadian Dollar?

  1. Potential Tariffs – U.S. President Donald Trump is once again threatening tariffs on Canadian exports, with potential measures coming as early as February. If these tariffs go into effect, they could send the Canadian economy into a tailspin, severely weakening the Loonie. Past tariffs on steel and aluminum hurt Canadian industries, and new trade restrictions could create even greater uncertainty for businesses and investors.
  2. Oil Prices Fluctuating – Canada’s economy relies heavily on oil, and when oil prices drop, the Canadian Dollar often follows. Recent oil price swings have added to uncertainty for the Loonie.
  3. Diverging Central Bank Policies – The Bank of Canada (BoC) and the US Federal Reserve are moving in opposite directions. Today, the BoC announced another rate cut, lowering rates to 3%, while the Fed held firm, signaling a wait-and-see phase. This contrast underscores expectations that Canada’s central bank will continue easing, putting additional pressure on the Canadian Dollar.

What’s Next for USD/CAD?

If the USD/CAD pair breaks above 1.4500, we could see new highs not reached since the early days of the pandemic. However, if it falls below 1.4270, it may signal a downward move, bringing relief for the Canadian Dollar.

The Canadian dollar is currently trading at 1.4407 CAD against the US Dollar.



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