- Trump plans to impose a 25% tariff on all goods from Canada.
- The dollar surged as Trump’s tariffs will help boost local businesses.
- Traders are keeping an eye on the looming FOMC meeting minutes.
The USD/CAD outlook indicates a sharp bullish turn as the dollar gains and the loonie collapses after Trump’s tariff vows. At the same time, market participants were awaiting more clues on Fed rate cuts from the FOMC policy meeting minutes.
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The dollar rallied on Tuesday after Trump said he would impose tariffs on goods from China, Mexico, and Canada. He plans to impose a 25% tariff on all goods from Canada. The news was a big blow for the Canadian dollar since Canada exports nearly 75% of its goods to the US. Consequently, tariffs will hurt Canada’s economy, weighing on the local currency.
Initially, the Canadian dollar had strengthened after upbeat data last week lowered the likelihood of a massive Bank of Canada rate cut in December. However, with Trump as the US president, there might be a significant slowdown in the economy in the near future. Therefore, the BoC might be forced to lower rates to spur growth.
On the other hand, the dollar surged on the tariff announcement, which will help boost local businesses. Trump’s goal is to boost economic growth in the US, making it greater than other major economies, especially China. Therefore, his policies are bullish for growth and the greenback. Moreover, increased economic demand will likely cause a spike in inflation that will force the Federal Reserve to pause its rate cuts.
Meanwhile, traders are keeping an eye on the looming FOMC meeting minutes. The November Fed meeting came right after Trump’s win. Therefore, markets will wait to see whether this led to a more cautious tone and a gradual outlook for rate cuts.
USD/CAD key events today
- US CB consumer confidence
- FOMC meeting minutes
USD/CAD technical outlook: Uptrend resumes after bears fail to breach 1.3951
On the technical side, the USD/CAD price has made a strong bullish candle that has broken above the 1.4100 resistance to make a new high. Initially, bears had taken charge by breaking below the 30-SMA and the bullish trendline. However, despite several attempts, the price could not breach the 1.3951 support level.
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Consequently, bulls resurfaced and broke above the SMA. Furthermore, they broke above the previous high at 1.4100 to make a higher high. This signaled a continuation of the bullish trend that might soon reach the 1.4200 key psychological level.
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