USD/CAD Price Forecast: Stuck in a familiar range ahead of Fed's Powell

• USD/CAD edges higher as Trump's new tariff provides a modest lift to the safe-haven USD.
• Recovering crude Oil prices and reduced bets for a March BoC rate cut underpin the Loonie. 
• Investors now look to Fed Chair Jerome Powell's testimony for some meaningful impetus.

The USD/CAD pair attracts some buyers for the second straight day on Tuesday, though it lacks bullish conviction and remains confined in a familiar range held over the past week or so. The US Dollar (USD) crept higher in reaction to US President Donald Trump's new tariffs on commodity imports and turns out to be a key factor acting as a tailwind for the currency pair. Trump signed executive orders imposing 25% tariffs on imports of steel and aluminum into the US and told reporters that he would announce reciprocal tariffs on other countries in the next two days. This reignited global trade war fears, which, in turn, boosted demand for traditional safe-haven assets, including the Greenback. 

Meanwhile, Friday's mostly upbeat US employment details, along with expectations that Trump's protectionist policies would boost inflation in the US, could force the Federal Reserve (Fed) to stick to its hawkish stance. This is seen as another factor that contributes to a modest USD uptick to over a one-week high. However, the market reaction so far has been limited, which is evident from the lack of any follow-through USD buying. Apart from this, a further recovery in Crude Oil prices from the year-to-date low touched last Friday underpins the commodity-linked Loonie and contributes to caping the USD/CAD pair amid diminishing chances of a Bank of Canada (BoC) rate cut next month.

In fact, the odds for a BoC rate cut at the March 12 meeting fell from 80% to 55% following the release of strong Canadian jobs data released on Friday. Traders also seem reluctant ahead of Fed Chair Jerome Powell's semi-annual congressional testimony. Powell's remarks will be scrutinized closely for fresh cues about the Fed's rate-cut path, which, in turn, will play a key role in influencing the USD demand in the near term. Apart from this, Oil price dynamics should contribute to providing meaningful impetus to the USD/CAD pair and contribute to producing short-term trading opportunities. Nevertheless, the mixed fundamental backdrop warrants caution before placing directional bets. 

USD/CAD daily chart

Technical Outlook

From a technical perspective, the range-bound price action witnessed over the past week or so could be categorized as a bearish consolidation phase against the backdrop of the recent pullback from the 1.4800 neighbourhood or over a two-decade high. Moreover, oscillators on the daily chart have just started gaining negative traction and favor bearish traders. That said, it will be prudent to wait for a convincing break below the trading range support, around the 1.4275-1.4270 region, before positioning for further losses. The USD/CAD pair might then accelerate the slide further towards the 1.4235 intermediate support en route to the 1.4200 mark and the 1.4165-1.4160 region.

On the flip side, the overnight swing high, around the 1.4375 area, now seems to act as an immediate hurdle ahead of the 1.4400 mark. Some follow-through buying has the potential to lift the USD/CAD pair to the next relevant barrier near the 1.4465-1.4470 horizontal zone. This is followed by the 1.4500 psychological mark, which, if cleared, will shift the near-term bias in favor of bullish traders. The subsequent move up could extend further towards the 1.4545-1.4550 region before spot prices eventually aim towards reclaiming the 1.4600 round-figure mark.