USD/CAD Price Forecast: Struggles Near 20-Day EMA on Fed Uncertainty and Inflation Risks

USD/CAD Price Forecast: Pair Struggles Near 20-Day EMA as Fed Independence Questioned

The USD/CAD pair continues to move sideways, edging down to around 1.3718 during Thursday’s Asian session. The pair is under pressure as US Dollar (USD) weakness dominates, following renewed threats from US President Donald Trump to remove Federal Reserve Chair Jerome Powell. Meanwhile, concerns around Canada's inflation outlook and rate policy are limiting the Canadian Dollar's (CAD) upside.

Trump’s Renewed Threats Weigh on US Dollar

The US Dollar has slipped in response to Trump’s escalating dissatisfaction with Fed Chair Powell. Trump has threatened to sack Powell, criticizing him for failing to deliver deeper rate cuts. The political interference risks compromising the Federal Reserve’s independence, causing investors to lose confidence in the USD.

This has triggered USD selling across the board, even though rate cut expectations remain unclear. Traders are increasingly concerned that the Fed may face pressure to act politically, which adds to downside risks for the Greenback.

Canadian Dollar Also Faces Pressure as Inflation Misses Target

While the Canadian Dollar benefits from a weaker USD, gains are limited due to domestic pressures. Recent economic data show that inflation is falling below the Bank of Canada's (BoC) 2% target, prompting speculation that interest rate cuts could be on the table.

This has created a tug-of-war scenario where both currencies face downward pressure, leading to a consolidation in the USD/CAD exchange rate around the 20-day Exponential Moving Average (EMA).

Technical Outlook: Neutral Bias

• Support: 1.3680
• Resistance: 1.3750
• The pair is oscillating around the 20-day EMA, signaling market indecision.
• A break below support may open the path to 1.3600, while a recovery above resistance could retest 1.3800.

Market Focus: US and Canadian Data Ahead

Investors will now shift their attention to:

• Final US Q1 GDP Growth Rate
• Canadian GDP data
• Any additional Fed commentary or political headlines

These events could provide fresh direction to the USD/CAD pair.

Conclusion

The USD/CAD pair remains subdued near the 20-day EMA as markets grapple with dual pressures: US political risk and Canadian monetary policy uncertainty. Until clearer macroeconomic signals emerge, the pair may remain trapped in a tight range.