- USD/CAD remains above 1.4300 as investors anticipate Fed Chair Jerome Powell’s testimony for insights into future monetary policy.
- The Federal Reserve kept interest rates unchanged in January
- The Canadian economy faces mounting pressure from US President Trump’s 25% tariffs on steel and aluminum imports.
The USD/CAD pair remains range-bound near 1.4330 in Tuesday’s European session as investors await Federal Reserve (Fed) Chair Jerome Powell’s testimony before Congress at 15:00 GMT. Traders are closely watching Powell’s remarks for insights into how long the Fed will maintain interest rates in the 4.25%-4.50% range. Analysts at Macquarie have revised their outlook, now expecting no rate changes in 2025, contrary to previous predictions of a single 25 basis point (bps) cut in either March or May.
Market sentiment suggests that US President Donald Trump’s 25% tariffs on steel and aluminum imports will fuel inflation, potentially forcing the Fed to keep its policy stance unchanged for an extended period. Meanwhile, the Canadian Dollar (CAD) faces a bearish outlook as Canada, the largest aluminum exporter to the US, is likely to suffer the most from these tariffs.
On the economic front, investors are also eyeing the US Consumer Price Index (CPI) data for January, set for release on Wednesday, to gauge inflation trends.
Technical Analysis: USD/CAD Holds Range Bound
USD/CAD continues to trade in a tight 1.4270-1.4380 range, with the 50-period Exponential Moving Average (EMA) near 1.4365 acting as strong resistance. The 14-period Relative Strength Index (RSI) hovers between 40.00 and 60.00, indicating a neutral trend.
USD/CAD 4-hour chart
- A breakout above the February 10 high of 1.4380 could push the pair toward the psychological resistance at 1.4500, followed by the January 30 high of 1.4600.
- On the downside, a break below the February 5 low of 1.4270 may trigger a decline toward the December 10 high of 1.4195, with further support at the December 11 low of 1.4120.
As markets brace for Powell’s testimony and upcoming inflation data, USD/CAD remains poised for potential volatility.
