- Trump said he would impose tariffs on steel and aluminum imports.
- Canada’s economy added 76,000 jobs in January.
- US jobs data indicated a mixed picture of the labor sector.
The USD/CAD forecast shows caution in the markets as traders weigh the impact of Trump’s tariffs on the global economy. Nevertheless, after an upbeat employment report, the Canadian dollar held near recent highs. On the other hand, a mixed US report kept rate cut expectations mostly unchanged.
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Over the weekend, US President Donald Trump said he would impose tariffs on steel and aluminum imports, raising concerns of trade wars. More tariffs will likely boost the dollar as local production and consumption increase. However, trade wars might hurt the global economy and impact the US. Canada escaped a 25% tariff that was to start last week, boosting the Canadian dollar. However, this pause might end next month, exposing Canada’s economy to punitive duties.
Nevertheless, the tariff relief last week supported the loonie. Moreover, data on Friday revealed that Canada’s economy added 76,000 jobs in January, well above estimates. At the same time, the unemployment rate unexpectedly fell to 6.6%. This eased pressure on the Bank of Canada to lower borrowing costs.
Meanwhile, US data on Friday showed slower job growth in January. However, the unemployment rate dropped, indicating a mixed picture of the labor sector. Traders are now looking forward to inflation data.
USD/CAD key events today
Market participants do not expect any key economic reports from the US or Canada. Therefore, they will focus their attention on US tariff developments.
USD/CAD technical forecast: Bears challenge the 1.2400 support
On the technical side, the USD/CAD price trades below the 30-SMA with the RSI below 50, indicating a bearish bias. The trend recently reversed after bullish momentum faded at the 1.2550 resistance level. Although the price made a higher high, the RSI made a lower one, creating a bearish divergence. This allowed bears to take charge by breaking below the 30-SMA.
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However, bears have met a solid hurdle at the 1.2400 support level. A break below this support will allow the price to reach the 1.2251 level. This will confirm a bearish trend. On the other hand, if the support holds firm, USD/CAD will bounce to retest the 1.2550 resistance level. A break above this level would confirm a continuation of the previous bullish trend.
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