• The USD/CAD pair rallied in the latter parts of 2024.

• Trump proposed a 25% tariff on goods imported from Canada.

• The loonie remains vulnerable after the Fed’s hawkish December meeting.

The USD/CAD forecast shows uncertainty for the Canadian dollar in the new year amid expected US tariffs, a hawkish Fed, and political uncertainty in Canada. However, the loonie rebounded Thursday as the dollar eased on the first trading day of 2025.

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The USD/CAD pair rallied in the latter parts of 2024 due to several factors that might spill into the new year. Markets were expecting a weaker economy after Trump proposed a 25% tariff on goods imported from Canada. Trump will take office this month. Canada’s economy will be significantly affected if Trump executes this new policy. At the same time, the Bank of Canada would be under a lot of pressure to cut interest rates and spur economic growth.

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Meanwhile, the loonie remains vulnerable after the Fed’s hawkish December meeting. The US central bank lowered its projection for rate cuts this year, leading to a rally in the dollar and Treasury yields. Notably, market participants will pay attention to economic data, which will likely confirm this new outlook. Experts believe that Trump’s new administration will boost growth and lead to a spike in consumer inflation. Therefore, policymakers will likely remain cautious about rate cuts, and the greenback will rally. 

On the other hand, political uncertainty in Canada could further weaken the loonie. Notably, there is massive pressure on Prime Minister Justin Trudeau to step down since his party might lose early this year.

USD/CAD key events today

USD/CAD technical forecast: 1.4450 resistance triggers consolidation

On the technical side, the USD/CAD price ranges between the 1.4350 support and the 1.4450 resistance levels. At the same time, it is chopping through the 30-SMA, a sign that both bears and bulls are strong. 

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Previously, bulls were in the lead as the price traded above the 30-SMA, with the RSI above 50. However, the uptrend paused at the 1.4450 resistance level. Here, bears emerged with as much strength, leading to a pause in the bullish trend. 

The price currently sits above the 30-SMA, meaning that bulls will soon retest the range resistance. A break above will signal a continuation of the previous uptrend. However, if the price breaches the range support, it will likely fall back to the 1.4200 support level.

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