- The USD/CAD outlook shows tariff uncertainty.
- Trump delayed the implementation of a 25% tariff on Canadian and Mexican goods.
- Traders eagerly await the US inflation report due on Friday.
The USD/CAD outlook shows tariff uncertainty, which is weighing on the Canadian dollar and strengthening the US dollar. Uncertainty about Canada’s economy amid tariffs has weakened the loonie. On the other hand, uncertainty about the global economy has hurt risk appetite, boosting the dollar.
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This week, Trump sent mixed signals regarding tariffs that caused a lot of uncertainty among traders. The US president proposed a 25% reciprocal tariff on European cars and goods that would significantly hurt the Eurozone economy.
However, Trump also delayed the implementation of a 25% tariff on Canadian and Mexican goods. The delay gave the Canadian dollar a slight boost. However, the risk of a weak economy due to tariffs puts a lid on gains. The Bank of Canada has expressed worries about the impact of Trump’s tariffs on the economy. The central bank has worked tirelessly to lower borrowing costs and spur economic growth. Therefore, tariffs would undo the progress and pressure the BoC to lower borrowing costs.
Meanwhile, market participants are paying attention to economic data from the US. Recent reports have shown weak business activity, raising Fed rate cut expectations. The inflation report due on Friday will provide more clues on the outlook for rate cuts.
USD/CAD key events today
- US prelim GDP q/q
- US unemployment claims
USD/CAD technical outlook: Bulls looking at 1.4400 resistance
On the technical side, the USD/CAD price is approaching the 1.4400 resistance after a recent trend reversal. Bulls took charge after the price paused its decline near the 1.4150 support level. As a result, USD/CAD now trades above the 30-SMA with the RSI above 50, supporting a bullish bias.
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However, the new rally is about to face its first hurdle at the 1.4400 resistance level. A break above this level will strengthen the bullish bias, allowing the price to make higher highs and lows. On the other hand, if the level holds firm, bears might resurface to retest the 1.4150 support level.
The bullish bias will remain if the price stays above the 30-SMA. On the other hand, if it breaks below the SMA and the 1.4150 support, the previous downtrend will continue.
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