New Trade Barriers and Weak Canadian Employment Paint a Complex Outlook for USD/CAD
The USD/CAD currency pair faced a turbulent trading week ending April 5, 2025, as global economic uncertainties deepened. From Trump’s sweeping new tariffs to Canada’s underwhelming job market report, both the US dollar and Canadian dollar saw major pressures. While USD/CAD dipped below critical support during the week, a late rebound kept the pair within a consolidative range, leaving traders guessing where momentum might head next.
Table of Contents
Economic Backdrop: Tariffs and Labor Market Concerns Shake Both Sides
Trump’s Tariff Policy Triggers Recession Fears
US President Donald Trump reignited global economic anxiety after announcing a blanket 10 percent tariff on all imports, with even higher duties placed on nations like China. While the move is intended to support domestic industries, investors interpreted it as a sign of potential retaliation, strained trade relationships, and a higher risk of recession.
The US dollar experienced a sharp decline in the immediate aftermath, as markets responded to the possibility of weaker economic growth and retaliatory action from global partners.
Fed Chair Powell Calms Markets—Temporarily
Later in the week, Federal Reserve Chair Jerome Powell attempted to soothe markets with a speech emphasizing caution in the face of economic uncertainty. While Powell hinted at a more measured approach to interest rate adjustments, concerns about inflationary risks caused by tariffs remained. This helped the dollar stage a recovery—but not a full reversal.
Canadian Jobs Report Underscores Domestic Economic Fragility
While the US saw a mixed jobs report—featuring a surge in employment but also higher unemployment—Canada’s labor market report was more definitively negative. The country reported:
- Weak job creation
- Rising unemployment
- Signals of a softening economy
This stark contrast in employment data between the two countries could influence near-term USD/CAD momentum, particularly if Canadian economic data continues to disappoint.
Key Events to Watch for USD/CAD Traders Next Week
Economic Calendar Highlights
- US Consumer Price Index (CPI)
- US Producer Price Index (PPI)
- Federal Open Market Committee (FOMC) Meeting Minutes
Traders will be especially focused on the next batch of inflation data. Last month’s CPI report showed an unexpected increase, causing speculation that the US might not be done battling inflation. Should this trend continue, rate cut expectations could be delayed, offering near-term strength to the USD.
However, concerns remain about tariff-driven slowdowns, creating an unpredictable landscape where data-driven reactions may be sharp but short-lived.
USD/CAD Technical Outlook: Bears Eye Deeper Drop if Support Fails
Price Action Analysis
The USD/CAD pair spent most of the week hovering near the key 1.4175 support level, eventually breaching it before pulling back higher. Though the pair closed above this line, the technical bias appears increasingly bearish.
- The price trades below the 22-day simple moving average
- The Relative Strength Index (RSI) remains under 50, suggesting bearish momentum
Key Support and Resistance Levels
- Immediate Support: 1.4175
- Next Major Support: 1.3802
- Resistance Ceiling: 1.4500
This week’s action marked another failed breakout attempt beyond the range resistance. Bears now appear to be testing the resolve of buyers. A decisive move below 1.4175—confirmed by daily closes—could open the door to a drop toward the 1.3802 level, a support last visited in early 2024.
On the flip side, if bulls regain momentum and reclaim the area above the 22-SMA, a push toward 1.4500 remains possible, although it would likely require a dovish Fed or poor US inflation data.
Conclusion: USD/CAD Navigates Trade Turmoil and Inflation Fears
The USD/CAD forecast for the upcoming week is clouded by trade-related risks, inflation uncertainty, and contrasting employment trends between the US and Canada. While recent price action suggests consolidation, bears are inching closer to regaining control.
Next week’s economic data will be crucial in determining whether USD/CAD breaks lower toward 1.3802 or remains range-bound. Traders should brace for potential volatility, particularly if inflation surprises or Fed rhetoric shifts again.
2 thoughts on “USD to CAD Weekly Forecast Amid 2025 Trade Tensions: Will Tariffs Push the Pair Below Key Support Levels?”