- The USD/CAD outlook shows traders dumping the loonie on tariff fears.
- An automobile tariff and a 25% levy on all imports will cloud the outlook for growth in Canada.
- BoC policymakers are becoming more cautious.
The USD/CAD outlook shows traders dumping the loonie as tariffs on Canada loom large. Trump confirmed an automobile tariff that will impact imports from Canada. At the same time, market participants worry about the impact of a 25% tariff on Canadian imports. Nevertheless, there is still optimism after the US president said he might exempt some countries from tariffs.
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Since Trump took office, he has controlled the outlook for Canada’s economy, by threatening, imposing, and postponing tariffs on the country. This has caused a lot of fluctuations in the Canadian dollar. Currently, the country is battling with tariffs on steel and aluminum in the US.
Moreover, an automobile tariff and a 25% levy on all imports might cloud the outlook for growth in Canada. The loonie gained in the previous session amid optimism of a softer tariff stance. This followed remarks by Trump that he would give some countries tariff breaks.
Elsewhere, the Bank of Canada policy meeting minutes revealed that policymakers were becoming more cautious. They are less convinced that inflation is on a downtrend. At the same time, uncertainty over tariffs might put the central bank in a wait-and-see position.
USD/CAD key events today
- US final GDP q/q
- US unemployment claims
USD/CAD technical outlook: Bears meet rejection below 1.4275
On the technical side, the USD/CAD price is rebounding after a false breakout below the 1.4275 support level. However, the bias is still bearish because the price trades below the 30-SMA with the RSI under 50. Moreover, the price has reached a lower low, showing bears might be ready to test lower prices.
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After trading in a big range area, volatility has dropped and the price is now oscillating between the 1.4275 support and the 1.4400 resistance. Therefore, if bulls take back control, the price will break above the 30-SMA to retest the 1.4400 resistance. This would also mean a continuation of the sideways move.
On the other hand, if the SMA holds firm, the price will bounce lower and make a better break of the 1.4275 support level. This would allow USD/CAD to continue a downtrend with lower lows and highs. Moreover, bears would target the 1.4175 support.
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