USD/CAD outlook: dollar strength tests key resistance

At its March 18 meeting, the US Federal Reserve announced that it would keep the interest rate unchanged at 3.75%, reflecting a moderately hawkish monetary policy stance. Policymakers highlighted persistent inflation above the 2.0% target and rising geopolitical tensions in the Middle East, which are driving energy prices higher, as key risks to the economy. Macroeconomic data released last week confirmed the mixed nature of the situation: in February, the producer price index significantly exceeded forecasts, showing that companies are passing rising costs on to consumers, especially in the services sector. At the same time, the revised estimate of fourth-quarter GDP growth was lowered to 0.7% on an annualized basis, half the preliminary estimate. This week, investor focus will shift to inflation data, as the Personal Consumption Expenditures Price Index is due on Friday at 14:30 (GMT+2). Economists expect the indicator to remain elevated, reinforcing expectations that the Fed will maintain its hawkish rhetoric.

Following the Bank of Canada’s latest meeting, borrowing costs also remained unchanged at 2.25%, while officials pointed to risks of rising fuel prices. However, due to the interest rate differential, traders continue to use carry trade strategies, which in the long run contributes to gradual weakness in the Canadian dollar and relative strength in the US dollar.

The long-term trend remains bearish. Today, the price is testing the key resistance level at 1.3725, and after a potential reversal, a move toward 1.3637 and 1.3525 is expected. However, if the pair consolidates above this level, the trend could shift to bullish, making long positions relevant with targets at 1.3920, the January high, and 1.4130, the high from November 2025. The pair is currently trading above the EMA (21) but below the EMA (190), meaning the short-term trend is bullish while the long-term trend remains bearish. The RSI (14) is in neutral territory, allowing for opportunities in both directions.

The medium-term trend is bullish. At the beginning of March, the pair corrected into the 1.3566–1.3548 support area, then reversed and climbed to 1.3650. Last week, quotes approached the 1.3753 level, and existing long positions may now be partially closed. If upward momentum continues and the price consolidates above 1.3753, the next target will be zone 2 at 1.3874–1.3855. In the event of a correction, the pair is likely to retest the 1.3566–1.3548 support area.

Support and resistance levels

Resistance levels: 1.3725, 1.3920, 1.4130.

Support levels: 1.3524, 1.3485, 1.3220.

Trading scenarios and USD/CAD forecast

Short positions may be considered below 1.3697, with targets at 1.3637 and 1.3525 and a stop-loss at 1.3750. Implementation period: 9–12 days.

Long positions may be considered above 1.3767, with a target at 1.3920 and a stop-loss at 1.3697.