USDCAD strengthens on expectations of a more hawkish Fed policy

The USDCAD pair continues to rise amid strengthening US dollar positions and weakening fundamentals in the Canadian economy, with the rate currently at 1.3661. Find out more in our analysis for 2 February 2026.

USDCAD forecast: key takeaways

• Donald Trump’s appointment of Kevin Warsh as the next Fed chair has strengthened the US dollar
• Canada’s real GDP was virtually unchanged in November
• Canada’s manufacturing sector contracted for the third time in the past four months
• USDCAD forecast for 2 February 2026: 1.3745

Fundamental analysis

The USDCAD rate is strengthening for the second consecutive trading session. Buyers increase pressure on the local resistance area near 1.3645, forming conditions for a breakout. The US dollar received additional support after President Donald Trump appointed Kevin Warsh as the next Fed chair. Markets perceive Warsh as a more hawkish candidate compared to alternative figures.

On Friday, US producer inflation data provided additional support to the US dollar. The Producer Price Index (PPI) rose by 0.5% in December compared to November, marking the fastest growth in the past three months. On an annual basis, the increase reached 3%. Actual readings significantly exceeded forecasts, reinforcing inflation risks and strengthening expectations of a more hawkish Fed monetary policy.

Meanwhile, Canadian macroeconomic data creates a contrasting backdrop. Real GDP was virtually unchanged in November. The manufacturing sector has contracted for the third time in the past four months, worsening the outlook for economic growth and reducing arguments for tighter monetary policy. The Bank of Canada’s decision to keep interest rates unchanged confirmed this scenario.

Technical outlook

USDCAD quotes rise after breaking above the upper boundary of the descending channel. Buyers are building a sustained bullish momentum and preparing to test the key resistance level, a breakout of which may accelerate the upward move. The USDCAD forecast for today suggests growth towards 1.3745.

The Stochastic Oscillator further confirms the bullish scenario. Signal lines exited overbought territory and formed a new bullish crossover, increasing buying pressure and the probability of continued growth.

The key technical condition for the scenario to materialise remains the consolidation above the 1.3675 level. This signal will confirm a breakout of the local resistance level and significantly increase the likelihood of reaching the 1.3745 target.

USDCAD overview

• Asset: USDCAD
• Timeframe: M15 (Intraday)
• Trend: bullish
• Key resistance levels: 1.3675 and 1.3745
• Key support levels: 1.3610 and 1.3565

USDCAD trading scenarios for today

Main scenario (Buy Stop)

Price consolidation above 1.3675 will confirm a breakout above the local resistance level, maintain the bullish market structure, and create technical conditions for opening long positions with priority on trend continuation. The Stochastic Oscillator confirms the upside scenario through a bullish crossover of signal lines. The market shows readiness to accelerate movement within the bullish trend. The risk-to-reward ratio exceeds 1:2. Potential profit upon reaching the target amounts to 70 pips, with possible losses capped at 30 pips.

• Take Profit: 1.3745
• Stop Loss: 1.3650

Alternative scenario (Sell Stop)

A bearish scenario becomes possible if prices fall below the 1.3610 level, indicating a return to the downward channel and a continued corrective in the pair.

• Take Profit: 1.3565
• Stop Loss: 1.3645

Risk factors

Risk factors for further USDCAD growth include a potential decline in global risk appetite and sharp fluctuations in oil prices, which may increase pressure on the currency pair. Additionally, any unexpected Fed policy easing or weak US economic data may slow the bullish momentum.

Summary

Fundamental factors continue to support further USDCAD strengthening, while a breakout of the 1.3645 level creates potential for continued upward movement. USDCAD technical analysis confirms a sustained bullish scenario, with an upside target at the 1.3745 level.

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