USDCAD consolidation ends up with price rising to 1.441

The USDCAD currency pair, as expected in the previous forecast, attempted to break out of the two-month sideways trend. However, Donald Trump's decision to postpone for a month Canada's 25% tariffs returned the price to the 1.425–1.445 range. The volatility has noticeably decreased in recent days, as traders are expecting new stimuli for directional movement. Considering the quotes are near the lower limit of the sideways trend, a growth momentum towards the level of 1.441 is more likely.

The US President has not yet imposed duties on all Canadian goods, but steel and aluminum have not escaped them. These metals will be subject to a 25% import tariff from March 12, and if negotiations with Canada do not go well, tariffs for local producers may rise to 50%. Canadian companies supply nearly 80% of their aluminum output and more than 20% of their steel output to the United States, and it will be difficult to find other buyers for such a large volume of products.

Today's statistics on US inflation for January could trigger a new wave of growth in USDCAD. As Fed Chairman Jerome Powell stressed in yesterday's speech, the price growth rate is still above the 2% target, and the regulator has no need to lower interest rates now. Trump's tariff policy adds to the uncertainty about the US inflation path.

Sean Osborne, Chief Currency Strategist at Scotiabank, estimates the fair value of USDCAD at 1.439. Market participants expect at least one more rate cut by the Bank of Canada in March-April, while the Fed is likely to keep a pause until the summer. If import tariffs were imposed on all Canadian goods in the US, the ratio of these countries' currencies would quickly start growing again.

The Stochastic indicator showed a buy signal, leaving the oversold zone. The nearest growth target is 1.441.

Consider the following trading strategy:

Buy USDCAD around the level of 1.43. Take profit – 1.441. Stop loss – 1.425.