- The USD/CAD outlook shows widening fears of trade wars.
- Trump’s 25% tariff on imports from Canada and Mexico took effect Tuesday.
- The US president imposed an additional 10% tariff on Chinese goods.
The USD/CAD outlook shows widening fears of trade wars after Trump implemented tariffs on China, Canada and Mexico. The fears have pushed traders to buy the safe-haven dollar. Meanwhile, the Canadian dollar has collapsed to a one-month low on the prospects of a weaker economy and lower borrowing costs.
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Trump’s 25% tariff on imports from Canada and Mexico came into effect on Tuesday, raising fears of trade wars between these nations. At the same time, the US president imposed an additional 10% tariff on Chinese goods.
Canada has promised retaliatory tariffs on US imports that could increase tensions between the two countries. The 25% tariff will significantly impact Canada’s economy as the country exports nearly 75% of its goods to the US. The Bank of Canada has worked tirelessly to spur the fragile economy with lower borrowing costs. Moreover, recent economic data has shown a rebound. Therefore, Trump’s tariff will undo most of this work, forcing the BoC to assume a more aggressive stance on rate cuts.
Meanwhile, the US dollar strengthened along with Treasury yields as market participants sought safety due to trade war fears. Manufacturing PMI data in the previous session had little impact on the currency as it aligned with expectations.
USD/CAD key events today
Market participants do not expect any key economic reports today. Therefore, they will keep digesting the impacts of Trump’s tariffs.
USD/CAD technical outlook: Price breaks past 0.5 Fib, eying 1.4600
On the technical side, the USD/CAD price has bounced off the 30-SMA with a massive bullish candle, indicating a surge in momentum. Moreover, the price has broken above the 0.5 Fib level that had previously acted as a solid resistance. This level allowed the price to retest the 1.4400 support level.
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USD/CAD can now climb to the next resistance at the 1.4600 level. If the bullish bias remains, the uptrend will continue past 1.4600. However, the RSI has reached the overbought region several times and has shown some weakness.
Bulls might be exhausted after the steep climb from the 1.1.4150 support level. Therefore, the price might pause at the next resistance as bulls rest. Moreover, after such a sharp rally, the price might pause for long or consolidate before it continues higher.
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