• The Fed might cut rates only twice this year.

• Data this week showed an unexpected drop in US unemployment claims.

• The loonie fell as markets anticipated tariffs on goods from Canada.

The USD/CAD weekly forecast paints a bullish picture for 2025, with gradual policy easing in the US and a weaker economy in Canada.

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Ups and downs of USD/CAD 

The USD/CAD price had a bullish week as the dollar rose at the prospect of gradual policy easing in the US. At the same time, upbeat data from the US supported the greenback. Meanwhile, the loonie fell ahead of Trump’s likely tariffs.

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The Fed might cut rates only twice this year, supporting the dollar. Meanwhile, economic resilience will also boost the currency. Data this week showed an unexpected drop in unemployment claims. Meanwhile, business activity in the manufacturing sector improved. 

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On the other hand, the loonie fell as markets anticipated tariffs on goods from Canada under Trump’s new administration.

Next week’s key events for USD/CAD

Next week, the US will release its first monthly employment report in 2025. At the same time, market participants will watch the FOMC meeting minutes. Meanwhile, Canada will only release its monthly employment report.

The US nonfarm payrolls report will show the state of employment in December. Faster-than-expected job growth will support the outlook for few Fed rate cuts this year. On the other hand, a downbeat report might increase rate-cut expectations. 

Similarly, Canada’s employment report will help shape the outlook for Bank of Canada rate cuts in 2025.

USD/CAD weekly technical forecast: Bulls challenge 1.4450 resistance

On the technical side, the USD/CAD price has paused its uptrend at the 1.4450 resistance level. The bullish bias is strong since the price trades above the 22-SMA with the RSI in the overbought region. 

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The uptrend has remained strong since the price broke above the 22-SMA. Bulls have respected this SMA as support, pushing prices off it to make new highs. At the same time, the RSI has traded above 50 in bullish territory, reaching the overbought region several times. 

If this momentum continues next week, the price will break above the 1.4450 level, making a higher high in the uptrend. However, before this happens, the price might pull back to retest the 22-SMA as support. If it bounces higher, the uptrend will continue. On the other hand, if it breaks below the SMA, it will signal a shift in sentiment to bearish.

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