- The USD/CAD outlook indicates a rallying dollar as markets prepare for Trump’s reciprocal tariffs.
- The US has only signed trade deals with the UK, China, and Vietnam.
- Market participants are expecting crucial employment figures from Canada this week.
The USD/CAD outlook shows a rallying dollar as markets brace for Trump’s reciprocal tariff deadline. Meanwhile, the Canadian dollar is plunging as traders worry about the likely impact of higher tariffs on Canada’s economy.
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With few major economic releases this week, all focus is on the looming tariff deadline. In the 90 days since the pause, the US has only signed trade deals with the UK, China and Vietnam. Therefore, most of its trading partners may soon start paying higher tariffs.
Talks between Canada and the US have been ongoing since last week. However, with no deal announced yet, traders remain uncertain about the outlook. High tariffs would reduce demand for goods from Canada, significantly hurting the economy. This, in turn, would put pressure on the Bank of Canada to resume its aggressive rate-cutting cycle, which would hurt the Canadian dollar.
Market participants are also expecting employment figures from Canada this week. At the moment, there is a slight chance that the BoC will resume rate cuts at its next meeting. A downbeat employment report could increase bets for such a move. On the other hand, if the labor market remains resilient, the central bank might continue its pause.
USD/CAD key events today
Traders are not expecting any key economic releases from the US or Canada. The main catalyst is tariff uncertainty.
USD/CAD technical outlook: Bulls approach the 1.3700 resistance
On the technical side, the USD/CAD price has broken above the 30-SMA and its bearish trendline, indicating a shift in sentiment. Bulls are now in the lead, with the price trading far above the 30-SMA and the RSI in bullish territory.
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However, the price must start making higher highs and lows to confirm a new bullish trend. At the moment, it is approaching the 1.3700 key resistance level. Here, it might pause and pull back to retest the recently broken SMA.
If it holds as support, the price will seek higher highs. This would allow the price to break above 1.3700 and likely reach the 1.3800 resistance. If not, it might revisit the 1.3550 support.
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