USD/CAD Price Forecast: Hangs near multi-month low; seems vulnerable around 1.3800

• USD/CAD meets with a fresh supply on Tuesday amid sustained USD selling bias.
• Subdued Crude Oil prices and domestic political uncertainty might cap the CAD.
• The technical setup favors bears and supports prospects for further depreciation.

The USD/CAD pair struggles to capitalize on the overnight bounce from the 1.3780 region, or a six-month low, and attracts fresh sellers during the Asian session on Tuesday. Spot prices drop to the 1.3800 mark in the last hour and seem vulnerable to slide further amid a broadly weaker US Dollar (USD).

US President Donald Trump's back-and-forth tariff announcements have weakened investors' confidence in the US economic growth and dented the USD's safe-haven appeal. Adding to this Trump's attack on Federal Reserve (Fed) Chair Jerome Powell raised doubts about the central bank's independence and keeps the USD depressed near its lowest level since April 2022 touched on Monday. This, in turn, is seen as a key factor exerting downward pressure on the USD/CAD pair.

Meanwhile, Crude Oil prices struggle to attract any meaningful buyers and remain below a two-week high touched on Friday amid worries that an all-out trade war would push the global economy into recession and dent fuel demand. This, along with domestic political uncertainty ahead of the Canadian snap election on April 28, could undermine the commodity-linked Loonie and lend support to the USD/CAD pair, though any meaningful bounce still seems elusive.

From a technical perspective, the recent breakdown below the very important 200-day Simple Moving Average (SMA), for the first time since October 2024, was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart are holding deep in negative territory, suggesting that the path of least resistance for the USD/CAD pair remains to the downside. Hence, an attempted recovery is more likely to get sold into and remain capped near mid-1.3800s.

Some follow-through buying, however, could trigger a short-covering rally and allow spot prices to reclaim the 1.3900 round figure. The momentum could extend further towards the 1.3950-1.3955 intermediate hurdle en route to the 1.3975-1.3980 supply zone, though it runs the risk of fizzling out near the 1.4000 psychological mark or the 200-day SMA.

On the flip side, weakness below the multi-month low, around the 1.3780 region touched on Monday, will reaffirm the negative bias and pave the way for further losses. The USD/CAD pair might then slide further towards the 1.3750-1.3745 support before eventually dropping to the 1.3700 mark and the next relevant support near the mid-1.3600s.

USD/CAD daily chart