This week's market outlook unfolds amid heightened volatility, driven by escalating trade tensions following President Trump's confirmation of sweeping tariffs on Canadian and Mexican imports. Meanwhile, key economic releases — including the US Non-Farm Payrolls report, ISM Services PMI, and Canada's Employment Change — will provide crucial insight into labor market conditions and overall economic health. With USDCAD at a technical crossroads, traders will be watching both fundamental developments and key price levels to gauge the pair's next directional move.
Overview
This week's market outlook unfolds amid heightened volatility, driven by escalating trade tensions following President Trump's confirmation of sweeping tariffs on Canadian and Mexican imports. Meanwhile, key economic releases — including the US Non-Farm Payrolls report, ISM Services PMI, and Canada's Employment Change — will provide crucial insight into labor market conditions and overall economic health. With USDCAD at a technical crossroads, traders will be watching both fundamental developments and key price levels to gauge the pair's next directional move.
Key Economic Events
Wednesday 02:30 am (GMT+2) - Australia: GDP q/q (AUD)
Wednesday 09:30 am (GMT+2) - Switzerland: CPI m/m (CHF)
Wednesday 15:15 (GMT+2) - USA: ADP Non-Farm Employment Change (USD)
Wednesday 17:00 (GMT+2) - USA: ISM Services PMI (USD)
Thursday 15:15 (GMT+2) - Europe: Main Refinancing Rate (EUR)
Thursday 15:30 (GMT+2) - USA: Unemployment Claims (USD)
Friday 15:30 (GMT+2) - Canada: Employment Change (CAD)
Friday 15:30 (GMT+2) - USA: Non-Farm Employment Change (USD)
Technical Analysis
Following a February 14 trough at 1.41499, USDCAD staged a notable recovery, driven by a confluence of technical and fundamental factors. The formation of a Tower Bottom candlestick pattern highlighted the inability of sellers to extend downward momentum, while the subsequent break above the 50-period Exponential Moving Average (EMA) provided early confirmation of shifting control in favor of buyers.
Technically, the pair's outlook has continued to improve, with the development of a Golden Cross — where the 20-period EMA crossed above the 50-period EMA — reinforcing a bullish bias. Historically, this formation is associated with sustained upward momentum.
Momentum indicators further support this constructive view. The Momentum Oscillator has moved firmly above the key 100 threshold, while the Relative Strength Index (RSI) remains above 50, reflecting ongoing buying interest. Additionally, Bollinger Bands have widened, with prices closing above the upper band — a signal typically consistent with trend continuation.
Collectively, these technical factors suggest a broadly bullish bias for USDCAD in the near term, with further upside likely as long as price action holds above key support levels.
Potential Upside Targets
If buyers maintain control of the market, traders may shift their focus to the following four potential resistance levels:
1.45408: The first level of resistance is determined at 1.45408, which reflects the daily high marked March 3.
1.46591: The second resistance level is observed at 1.46591, which aligns with the weekly resistance, R2, estimated using the standard Pivot Points methodology.
1.47920: The third price objective is projected at 1.47920, representing the peak formed on February 3.
1.48482: An additional price objective is projected at 1.48482, representing the weekly resistance, R3, estimated using the standard Pivot Points methodology.
Potential Downside Targets
If sellers take control of the market, traders may focus on the following four key support levels:
1.43705: The initial support level is estimated at 1.43705, representing the weekly Pivot Point, PP, estimated using the standard methodology.
1.42710: The second support level is determined at 1.42710, aligning with the weekly support, S1, estimated using the standard Pivot Points methodology.
1.41499: The third downside target is observed at 1.41499, corresponding to the trough marked February 14.
1.40819: An additional downside target is noted at 1.40819, reflecting the weekly support, S2, estimated using the standard Pivot Points methodology.
Fundamentals
President Donald Trump confirmed that 25% tariffs on all Canadian and Mexican imports, with a lower 10% rate on Canadian energy, will take effect Tuesday, escalating a continental trade war. Trump linked the tariffs to border security and fentanyl trafficking, though Canadian officials insist cross-border fentanyl flows are minimal. Despite Canada's diplomatic efforts and enhanced border measures, Trump declared there is no room left for further negotiations. Ottawa is prepared to retaliate with 25% tariffs on $30 billion in US goods, with more to follow. The tariffs are expected to raise costs for American consumers and add pressure ahead of the Canada-US-Mexico Agreement review while Trump expands his broader tariff agenda targeting steel, aluminum, autos, copper, lumber, and agricultural products.
On the other hand, the US Manufacturing PMI registered 50.3% in February, indicating marginal expansion in the sector for the second consecutive month after more than two years of contraction. New orders and backlogs contracted, while production grew slightly and employment declined as companies remained cautious about hiring. Supplier deliveries slowed, and prices surged, partly due to tariff-related cost increases. Despite ongoing demand weakness and operational uncertainty tied to new tariffs, some industries, including petroleum, food, chemicals, and transportation equipment, reported growth. Overall, manufacturers are navigating rising costs, supply chain adjustments, and uncertainty surrounding trade policy under the new administration.
Conclusion
With USDCAD at a critical juncture, both technical and fundamental factors are likely to drive near-term price action. Escalating trade tensions between the US and Canada, combined with key economic releases such as the US Non-Farm Payrolls and Canada's Employment Change, will shape market sentiment in the days ahead. While technical indicators point to a cautiously bullish outlook, ongoing tariff developments and broader economic uncertainty could inject additional volatility, keeping traders focused on evolving risks and opportunities.