USD/CAD forecast: here’s why the Canadian dollar is surging

The USD/CAD exchange rate has crashed and formed a death cross pattern in the past few months. It initially peaked at 1.4793 in February and then plunged by 8% to 1.3600. This article explores what to expect ahead of the Canadian jobs data and the US trade war deadline.

Why the USD/CAD has crashed

The USD/CAD exchange rate has declined significantly over the past few months due to the ongoing decline in the US Dollar Index (DXY). It has crashed to $96, down from the year-to-date high of $110 to $96 today. 

The US dollar has plummeted against most major currencies, including those of emerging and developed countries. For example, the EUR/USD exchange rate has jumped by 15%, moving from a low of 1.0175 to a high of 1.1825. 

Similarly, the GBP/USD exchange rate has soared from a low of 1.2100 to a high of 1.3800. Other top pairs like the USD/JPY and USD/CHF have had a similar price action. 

The US dollar index has crashed as global investors express concerns about its role as a safe-haven currency. For one, Trump initiated a trade war unilaterally, affecting all countries. 

The US Congress also passed the Big Beautiful Bill which will increase the US public debt substantially over time. For example, the bill will extend the tax cuts implemented by Donald Trump during his first administration. 

Additionally, the bill introduces new tax cuts on tips, overnight pay, and pensions. It also boosted the debt ceiling by $5 trillion to avoid the regular risks of a government shutdown. 

The bill came a few months after Moody’s downgraded the US credit rating, warning about uncontrolled spending in Congress. 

The USD/CAD pair has also crashed as geopolitical risks have faded in the past few weeks. For example, the war between Iran and Israel ended after 12 days, and Trump is now considering talks with Iran. The US dollar often drops when geopolitical risks end because it is often seen as a safe-haven asset. 

Canada jobs data and trade war news ahead

The next key catalyst for the USD/CAD pair will be the upcoming news on trade war as Trump’s deadline will end this week. Trump increased tariffs on Canadian goods, including steel, aluminium, and vehicles. 

He recently paused the talks with Canada, citing a 3% tax that would affect top companies like Google, Meta Platforms, and Apple. Canada then reacted swiftly and ended the taxes, hoping that it will have a deal with the US. A potential deal between the two countries will be highly bullish for the Canadian economy.

The other important catalyst for the USD/CAD pair will be Canada’s jobs numbers scheduled on Friday. Economists expect the data to show that the unemployment rate remained at 7% while the economy created 10k jobs.

USD/CAD technical analysis

The daily chart shows that the USD/CAD exchange rate has been in a strong downward trend in the past few months. It has crashed from a high of 1.4793 in January to the current 1.3600.

The pair has formed a death cross pattern as the 50-day and 200-day moving averages crossed each other. It has also moved below the 61.8% Fibonacci Retracement level at 1.3745. 

Therefore, the pair will likely continue falling in the next few days as traders target the nex key support level at 1.3460, the 78.6% retracement level.