- Trump’s administration did not give any guidance on tariff plans on Monday.
- Trump told reporters he was considering near-term tariffs on Canada and Mexico.
- Market participants are looking forward to Canada’s inflation data.
The USD/CAD outlook shows a sudden shift in sentiment amid mixed signals on Trump’s tariff plans. The Canadian dollar rallied in the previous session as it became clear that the new administration would not implement tariffs immediately. However, this outlook shifted when Trump hinted at starting next month.
-Are you interested in learning about forex tips? Click here for details-
On Monday, the greenback collapsed as Trump’s first day in office failed to be as aggressive on policy changes. The new administration did not give any guidance on tariff plans, leading most to believe it would be a gradual shift. As the dollar collapsed, its peers, especially the Canadian dollar soared.
For weeks, market participants had worried that Trump would aggressively implement a 25% tariff on goods imported from Canada. Therefore, the lack of guidance was a relief for the loonie. Such a heavy tariff would hurt the local economy and push the Bank of Canada to cut interest rates further to spur growth.
However, the trend turned sharply overnight after Trump told reporters he was considering near-term tariffs on Canada and Mexico. According to him, February 1 might be the right time to implement the tariffs.
Elsewhere, market participants are looking forward to inflation data from Canada, which will shape the outlook for Bank of Canada rate cuts.
USD/CAD key events today
- Canada CPI m/m
- Canada median CPI y/y
- Canada trimmed CPI y/y
USD/CAD technical outlook: Broad range consolidation
On the technical side, the USD/CAD price fell back into its range area, confirming a false bullish breakout. However, the price made a whiplash move within the range, reaching the range support and rising back to the resistance with single large candles. This shows increased volatility that was contained in the range.
-Are you interested in learning about the forex basics? Click here for details-
Currently, the price trades above the 30-SMA, with the RSI above 50, supporting a bullish bias. Initially, bulls broke above the range resistance but failed to close above the level, making a large wick. If they succeed at breaking out, the price will likely breach the 1.4501 resistance level. Otherwise, it will fall back to the range support.
A break below the range support would indicate a bearish breakout. However, to confirm a new downtrend, the price would have to start making lower highs and lows.
Looking to trade forex now? Invest at eToro!
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
