- The Canadian economy grew at an annual rate of 1.0% in the fourth quarter.
- The Bank of Canada is likely to pause rates next week.
- US inflation data is in line with expectations.
The USD/CAD outlook took a slight dip on Friday, driven by Canadian dollar strength following encouraging economic data from Canada. Of particular note was Canada’s economic expansion of 1.0% in the fourth quarter, which beat forecasts. As a result, expectations for a rate cut have fallen.
–Are you interested in learning more about automated Forex trading? Check out our detailed guide-
The Bank of Canada had expected zero growth, while economists had forecast growth of 0.8% in Q4. Unlike Japan and Great Britain, which fell into recession at the end of 2023, the Canadian economy is expanding slowly. Therefore, there is little pressure on the Bank of Canada to cut interest rates.
Investors are eagerly awaiting the BoC’s next policy meeting next week to get a sense of the outlook for interest rates in Canada. The central bank is likely to pause rates as it has done in the past few meetings. However, high interest rates gradually slowed both inflation and growth. Therefore, the pressure on the central bank to reduce interest rates increases. Markets currently have an 80% chance of a rate cut in June.
Inflation in Canada has gradually fallen from a high of 8.1% to 2.9%. However, policy makers are still not convinced that it is under control.
Meanwhile, the dollar was weaker on the day after inflation data came in line with expectations. The PCE price index showed growth on a monthly basis. However, the drop in the annual figure boosted expectations of a Fed rate cut in June.
USD/CAD Key Events Today
- US ISM manufacturing PMI
- US consumer sentiment
Technical Outlook USD/CAD: Price takes a breather at resistance at 1.3575


On the technical side, the USD/CAD price paused near the key resistance level of 1.3575. The break comes after a bullish move starting at the 1.3450 support level that pushed above the 30-SMA resistance line. Therefore, the bias is bullish. Furthermore, the RSI is above 50, showing solid bullish momentum.
–Are you interested in learning more about forex signals? Check out our detailed guide-
Accordingly, the bulls could be waiting at the nearest support level to continue the uptrend. At the moment, the closest support is at the 30-SMA. Therefore, the price could consolidate or fall as the SMA catches up. Once that happens, the bulls could re-emerge to push the price to the key 1.3625 level.
Do you want to trade Forex now? Invest in eToro!
67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing money.