Canadian Dollar Weekly Forecast: USD/CAD, CAD/JPY, EUR/CAD

Canadian Dollar, USD/CAD Talking Points:

• It was another indecisive week for USD/CAD as the pair continued to see price action narrow into a longer-term symmetrical wedge, which when combined with the prior bullish trend makes for a bull pennant formation.
• CAD/JPY showed a strong bounce on Monday that held into Tuesday and the BoJ rate decision, with sellers returning on Wednesday.
• EUR/CAD continued to pullback from the early-March breakout, testing the 23.6% retracement of the November-March move.

Indices AD

Tariffs continue to dominate the discussion around both the U.S. and Canadian dollars, but price action in USD/CAD has been considerably calmer since the early-February spike that saw the pair rush up to fresh 20-plus year highs. It’s largely been a matter of digestion over the past seven weeks, and that’s shown with both higher-lows and lower-highs. I looked into that backdrop on Thursday, highlighting the symmetrical triangle atop the bullish trend that makes for a bull pennant formation.

With the April 2^nd tariff date fast approaching, this fits with price action as we can see profit taking from the prior bullish breakout leading to lower highs combined with buyers bracing for a possible extension in the breakout should tariffs actually go through this time, even though considerable confusion remains on that topic.

USD/CAD Weekly Chart

USD/CAD Daily

On a shorter-term basis these can be difficult situations to speculate around which probably seems as a pretty obvious statement. This is something that can often be addressed with longer-term charts and taking a step back in attempt of getting greater perspective, and that’s why that bull pennant formation above remains of importance. Digestion such as we’ve seen with the symmetrical triangle often comes with no directional bias, as it’s simply a narrowing of prices into a tighter and tighter range that can eventually break out.

But, when that digestion is combined with a previously strong trend, one can imagine that there remains an imbalance of bulls holding positions and given that they haven’t cut bait yet, that would continue to show the potential for a bigger-picture bullish bias.

The quandary at that point is one of motive, as the April 2^nd tariff date isn’t exactly a secret. But given the multiple push backs from the U.S. side thus far, as tariffs were initially supposed to come into play on day one of President Trump’s term, and then February 1^st and then again in March, it seems that markets are dubious that tariffs will actually be implemented. And if they are, there’s a lot that we still don’t know, like what products tariffs will apply to or how much exactly they would be; on top of how they would be implemented and enforced.

That type of pandemonium could lead to a similar backdrop that we had in early-February, when the pair broke out in a very big way only to snap back when tariffs were inevitably pushed back. So, it would seem that the bull case would be supported by Trump actually pushing through tariffs this time, with no delay or truces that sees that date push back to May. And he may have motive to do so this time as a change in Canadian leadership combined with snap elections set for later in April produce a more vulnerable backdrop than what had shown before.

This, of course, could cause issues in American markets but that hasn’t seemed to be a factor that Trump is averse from, and it may actually create a swell of support for softer monetary policy from the Fed which is something that President Trump has already opined about on Twitter.

So, it would be too early to rule bulls out of this yet in USD/CAD and if we do see tariffs actually get pushed through this time on April 2^nd without further delay, the fundamental backdrop could be fitting for bullish continuation of the bull pennant formation.

USD/CAD Daily Chart

USD/CAD Longer-Term

As I’ve been saying since November, I think the longer-term range will end up playing out here. But for that to happen, I think we would need to see some sort of deal struck between the two nations on a longer-term, bigger picture basis.

I talked about this backdrop in the Thursday article, as Canada becoming a 51^st state seems a non-starter on the Canadian side, but it does make sense as a negotiation tactic from the U.S. side, with Trump asking for more than he knows possible so that they can settle somewhere in between, and in this case, that would seem to be some sort of preferential trade agreement on both sides that sees Canada dropping tariffs on American exports to allow trade to flow more freely across the northern border. The election in later-April makes this more of a curveball, however, so I’m fully expecting the topic of Canada-U.S. trade relations to be a dominating factor in that discussion and, in-turn, USD/CAD price action.

On a longer-term basis, I wouldn’t consider the nine-year range broken until we had a closed monthly candle through the 1.4668-1.4690 area.

USD/CAD Monthly Chart

CAD/JPY

There could be some continued interest for CAD bears in CAD/JPY as the pair put in a fresh yearly low in the prior week. With CAD/JPY as a cross-pair it and some loaded dynamics showing in both USD and JPY, it does seem as though CAD/JPY is along for the ride, however. And as I’ve been discussing on USD/JPY, the pair has continually brewed bear traps which makes it more difficult to chase the pair lower. Given the reaction to that fresh yearly low that case also seems to apply in CAD/JPY. 

Resistance, however, can be a more interesting scenario as that opens the door for trend continuation purposes, and there’s a big spot sitting overhead in CAD/JPY around the 105.00 handle.

On a shorter-term basis, last week produced a higher-high with a test of the 38.2% Fibonacci retracement of the 2025 sell-off, and the pullback from that has so far held a higher-low at the 23.6% retracement. If that level can hold through next week’s open, there’s a pathway for continuation of shorter-term higher-highs and lows with that 105.00 area in-sight as next resistance. If bulls can then drive through that, next resistance can be sought around the 105.92 Fibonacci level.

CAD/JPY Daily Chart

EUR/CAD

EUR/CAD would appear to be in a similar spot, where a shorter-term counter-trend setup shows amidst a bigger picture trend. EUR/CAD put in a massive breakout in early-March, helped along by the EUR/USD breakout. In EUR/CAD, however, the pair jumped up to a fresh four-year-high and that continued to drive in the following week.

Last week was the first red bar since then, however, and prices continued to pullback to the 23.6% retracement of the November-March move, which has so far set support as buyers have defended the 1.5500 handle.

EUR/CAD Daily Chart

Taking a step back for greater perspective highlights a possibly more attractive area for longer-term support to play, taken from around a prior spot of resistance that’s now confluent with the 50% mark of that recent major move. That plots around the 1.5200 area and this would be something that seems to align with the timelines around tariffs, where there’s essentially 11 days from this writing for tariffs to come into effect.

EUR/CAD Weekly Chart

--- written by James Stanley, Senior Strategist