Canadian Dollar coil ahead of central bank double-header

• The Canadian Dollar stuck to familiar levels on Tuesday.
• The Bank of Canada and the Federal Reserve are both due this week.
• The Loonie's rate differential is set to widen further, limiting bullish odds.

The Canadian Dollar (CAD) stuck to familiar levels on Tuesday, treading water as Loonie traders buckle down for the wait to this week's double-header of key central bank showings. The Bank of Canada (BoC) is broadly expected to cut interest rates yet again on Wednesday, while the Federal Reserve (Fed) is set to stand pat on interest rates for most of the first half of the year.

The BoC's upcoming rate cut will see the Canadian Dollar's rate differential against the Greenback widen even further, putting downside pressure on the Loonie. With USD/CAD already testing multi-year highs, further downside pressure on the Loonie will only worsen things.

Daily digest market movers: Tariff threats rule the headlines as traders await Fed and BoC

• BoC forecast to drop interest rates another 25 bps on Wednesday.
• Fed set to stand pat on rates as central bankers weigh near-term outcomes.
• US President Donald Tump reiterated his willingness to use sweeping tariffs to try and force production from other countries into the US.
• Possible inflation pressure from tariffs could counter-intuitively make it harder for the Fed to cut rates, despite President Trump declaring his intent to "ask" the Fed to lower rates.

Canadian Dollar price forecast

USD/CAD continues to churn sideways, spiraling around the 1.4400 handle. With price action constrained in the midrange of a lateral channel, technical indicators are drifting back to their medians.

Bids are constrained between 1.4500 and 1.4300,j and a quick break to either direction could kick off a firm new leg of a trend.

USD/CAD daily chart