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The USD/CAD pair is rebounding from the 1.4300 level, which marks the weekly low, but its recovery may face significant hurdles.
The U.S. dollar index has dropped close to November lows, pressured by the tariffs imposed by Donald Trump and growing expectations that the Federal Reserve may cut interest rates multiple times in 2025. The latest Automatic Data Processing (ADP) report showed that private sector employment in the U.S. grew by just 77K in February, falling far short of the 140K forecast. This weak data has raised concerns over a potential economic slowdown despite continued expansion in the services sector.
Additionally, Trump's one-month delay in enforcing new tariff agreements with Mexico and Canada for U.S. auto manufacturers has reduced the immediate risk of a trade war, prompting investors to shift toward riskier assets.
At the same time, the Canadian dollar is gaining support from expectations that the Bank of Canada (BoC) will pause its rate-cut cycle at the upcoming policy meeting. Additionally, recovering oil prices are providing a boost to the Canadian economy.
However, traders may hold off on making major decisions until Friday's key employment reports from both the U.S. and Canada.
Today's economic calendar includes the weekly U.S. jobless claims report and the Ivey PMI data from both the U.S. and Canada. These releases could provide some volatility early in the North American session. Furthermore, speeches from key FOMC members may influence demand for the U.S. dollar, while oil price movements could also impact USD/CAD trading opportunities in the short term. Given the mixed fundamental backdrop, buyers should exercise caution.
From a technical perspective, 1.4300 has now become a key pivot level. A convincing breakdown below this support could trigger a further decline toward 1.4260, with the next downward target at the psychological level of 1.4200, which aligns with the 100-day Simple Moving Average (SMA). A break below this SMA could act as a bearish trigger, leading to deeper losses.
On the daily chart, oscillators have not yet turned negative but are losing bullish momentum, signaling the need for caution.
On the other hand, any recovery attempts will face strong resistance near the 1.4400 round level. A breakout above this mark could push the pair toward 1.4470, with a further rally potentially targeting 1.4500—a key psychological level and the monthly high reached on Tuesday.
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