The USDCAD pair showed moderate growth during Wednesday morning, recovering from recent losses incurred over the previous two days. The latest upward momentum is attributed to renewed demand for the US dollar following President Donald Trump’s announcement to retract his threat to remove Federal Reserve (Fed) Chairman Jerome Powell.
Investors had earlier expressed concern over potential interference in the Fed’s independence, amid Trump’s criticism of the central bank for not implementing more aggressive rate cuts. However, on Tuesday, Trump stated he had no intention of removing Powell but urged him to take stronger action.
Additionally, the dollar received support from Treasury Secretary Scott Bessent’s comments suggesting a potential easing of trade tensions with China. The White House also reported progress in negotiations to reduce tariffs. According to spokesperson Karolyn Leavitt, 18 countries have submitted trade proposals, with discussions expected with 34 more nations soon. These developments indicate a shift towards a less confrontational trade stance from Washington.
Canada’s currency, despite traditional support from rising oil prices, faces pressure due to a deteriorating economic outlook. The International Monetary Fund (IMF) lowered Canada’s GDP growth forecast to 1.4% for 2025, reinforcing expectations that the Bank of Canada will maintain a neutral policy stance. Meanwhile, the US Federal Reserve may adopt a tougher monetary policy if inflation accelerates.
Technically, USDCAD shows downward movement on the H4 chart. However, the H2 chart indicates potential trend reversal. Wave analysis suggests the third downward wave is nearing completion, with most of its progression already realized. The Relative Strength Index (default parameters) shows a bullish divergence, signaling a possible reversal and transition to the fourth upward wave.
Signal:
Short-term prospects for USDCAD suggest buying.
The target is at the level of 1.4030.
Part of the profit should be taken near the level of 1.3900.
A stop-loss could be placed at the level of 1.3700.
The bullish scenario is short-term, so trade volume should not exceed 2% of your balance.