Daily Price Outlook
During the European trading session, the USD/CAD pair struggled to extend its rally toward the 1.4500 mark, encountering strong selling pressure that pushed it down to 1.4428.
The pair touched an intra-day low of 1.4410 as the US Dollar lost momentum, despite the Canadian Dollar (CAD) sinking to a one-month low.
However, the Loonie came under additional pressure after US President Donald Trump confirmed that new tariffs—25% on Canadian goods and 10% on energy exports—would take effect starting Tuesday.
Therefore, the announcement fueled further weakness in the CAD, limiting USD/CAD’s upside potential and adding to market volatility.
Trump’s Tariffs and Lower Crude Prices Pressure the Canadian Dollar
On the US front, President Donald Trump reaffirmed plans to impose tariffs on Canada and Mexico, which were originally set for April but moved up to March. The new trade restrictions have sparked fears of a trade war, raising concerns about their impact on the global economy.
Consequently, the Canadian Prime Minister’s office confirmed that Canada will impose retaliatory tariffs on US imports starting Tuesday.
Canada plans to begin with 25% tariffs on US imports worth C$30 billion and is actively considering additional non-tariff measures in collaboration with provinces and territories.
This escalating trade conflict introduces further uncertainty, which could impact both the Canadian Dollar and broader market sentiment in the coming sessions.
Meanwhile, lower crude oil prices have put additional pressure on the Canadian Dollar (CAD), as Canada is the largest oil exporter to the US. Reports that OPEC+ will increase oil production in April have further dragged oil prices down, reducing demand for the commodity-linked CAD.
Consequently, the tariffs and falling oil prices weakened the Canadian Dollar, pushing USD/CAD higher. However, trade war fears and market volatility limited the pair’s gains, preventing a sustained breakout above key resistance levels.
Weak US Data Fuels Fed Rate Cut Speculation, Weighing on USD
On the other hand, the US Dollar has been losing traction due to weaker economic data. The ISM reported that US Manufacturing PMI fell to 50.3 in February, below expectations of 50.5 and down from January’s 50.9.
This raised speculation that the Federal Reserve might cut rates in June, with the probability rising to 87% from 69% last week, according to the CME FedWatch tool. The dovish outlook pressured the US Dollar, limiting further gains for USD/CAD despite the Canadian Dollar's weakness.
USD/CAD – Technical Analysis
The U.S. dollar is holding firm against the Canadian dollar, trading at $1.44815, maintaining an upward bias but still below its pivot point of $1.45201.
The pair remains supported by the 50-day EMA at $1.44122, which has provided a near-term floor for buyers.
However, a failure to reclaim the pivot point could shift momentum lower, exposing USD/CAD to downside risks toward immediate support at $1.43964, followed by deeper levels at $1.43190 and $1.42453.
If bullish momentum persists, USD/CAD will need a decisive break above $1.45201 to test the first resistance at $1.45947. A stronger rally could extend gains toward $1.46429, with a more significant upside move targeting $1.47012.
However, recent price action suggests cautious trading, with selling pressure likely to emerge near resistance levels.
Traders may consider short positions below $1.45190, with a take-profit target at $1.44178 and a stop-loss at $1.45861 to manage risk. The U.S. dollar’s strength, largely driven by Federal Reserve rate expectations, remains a key factor in determining USD/CAD’s trajectory.
Meanwhile, oil price movements could influence the Canadian dollar, as stronger crude prices typically provide support for CAD, while weakness in energy markets could exacerbate downside risks for the loonie.
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