- Trump failed to provide guidance on the proposed 25% tariff on Canadian goods.
- The US president said the Fed should continue lowering borrowing costs.
- Data from Canada revealed that retail sales made no change in November.
The USD/CAD outlook shows the impact of Trump’s tariff threats fading, allowing the Canadian dollar to recover. On the other hand, the US dollar eased after Trump called on the Federal Reserve to continue lowering borrowing costs.
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Market participants had eagerly awaited Trump’s speech on Thursday for more clues on proposed trade tariffs. However, he failed to provide guidance on the proposed 25% tariff on Canadian goods. As a result, investors were relieved, and the Canadian dollar rebounded.
Instead, the US president said the Fed should continue lowering borrowing costs. Analysts have forecasted a hawkish Fed under Trump’s administration. This outlook has boosted the dollar’s rally in recent weeks. However, if the president supports the central bank’s objective of attaining price stability, interest rates will drop, and the dollar will fall.
Meanwhile, data from Canada revealed that retail sales made no change in November, compared to estimates of a 0.2% increase. However, traders focused on the flash estimate for December, which indicated a 1.6% jump in sales. A rebound in Canada’s economy will ease pressure on the Bank of Canada to lower borrowing costs, allowing the loonie to recover.
USD/CAD key events today
- US flash manufacturing PMI
- US flash services PMI
USD/CAD technical outlook: Bears aiming for a range breakout
On the technical side, the USD/CAD price trades below the 30-SMA with the RSI below 50 in bearish territory. Therefore, bears are in the lead. However, on a larger scale, the price has remained in consolidation between the 1.4300 support and the 1.4450 resistance for a long time.
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It has chopped through the 30-SMA with no clear direction during this time. At the same time, the RSI has oscillated between bearish and bullish territory, showing no bias. Therefore, if this consolidation continues, the price will soon reverse at the range support.
However, if bears are finally ready to take charge, USD/CAD will break below the range support. Such an outcome would allow the price to make a lower low and start trending lower. Moreover, it will allow bears to retest the support levels like 1.4201.
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