The USD/CAD pair is edging closer to a key technical resistance level, with traders watching for a potential breakout above the 61.8% Fibonacci retracement near the mid-1.4500s. The pair has been gaining momentum amid persistent U.S. dollar strength and a softening outlook for the Canadian dollar, driven by shifting risk sentiment and commodity price fluctuations.
The greenback continues to find support as investors reassess the Federal Reserve’s interest rate trajectory. With U.S. economic data showing resilience, expectations of prolonged higher rates have kept demand strong for the dollar. In contrast, the Bank of Canada (BoC) has taken a more cautious tone, leaving the Canadian dollar vulnerable to further downside pressure.
Oil prices, a key driver for the Canadian economy, have struggled to maintain upward momentum, adding to the loonie’s weakness. Any further decline in crude oil prices could weigh further on USD/CAD, reinforcing the pair’s bullish momentum. Additionally, global risk sentiment has favored the U.S. dollar as a safe-haven asset, further supporting upward pressure on the pair.
USD/CAD 1-D Chart as of March 04, 2025 (Source: TradingView)
Technically, the 61.8% Fibonacci retracement level remains a critical hurdle. A clear break above this zone could pave the way for additional gains, with 1.4600 emerging as the next potential target for bulls. However, if the pair fails to sustain its momentum, a pullback toward 1.4400 could be on the table, depending on shifts in market sentiment and economic releases.
Market participants will closely watch upcoming U.S. and Canadian economic data, including inflation and employment figures, for further direction. Any signs of divergence in monetary policy between the Fed and the BoC could act as a catalyst for the next major move in USD/CAD.
For now, the pair remains in an uptrend, with traders eyeing whether the 61.8% Fibonacci level can hold or if a breakout will push USD/CAD into new territory.
