- The USD/CAD outlook shows renewed tariff uncertainty in the US, dragging the dollar lower.
- The greenback rebounded last week after Trump said there was significant progress in trade talks.
- Business activity in the US services sector expanded further.
The USD/CAD outlook shows renewed tariff uncertainty in the US, dragging the dollar lower. The greenback fell against its peers on Monday after Trump announced new film tariffs. Meanwhile, market participants were gearing up for the FOMC policy meeting.
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On Sunday, Trump announced a 100% tariff on all films made outside the US. This move dashed hopes of the US president taking a softer stance on trade policies. As a result, the dollar dropped.
Last week, the greenback rebounded after Trump said there was significant progress in trade talks. He said the US would soon sign trade deals with several countries, including India. However, market participants are still waiting for this. Furthermore, the trade war between China and the US continues to hurt both economies. Trump has said several times that the two countries were getting closer to a deal. However, progress has stalled. A re-escalation of tariff uncertainty could weigh on investor confidence and the dollar again.
However, data on Monday revealed that business activity in the US services sector expanded further, easing fears of a recession. The report followed an upbeat monthly employment report. As a result, Fed June rate cut bets have dropped. Market participants are now pricing only a 37% chance of such a move.
Meanwhile, the Fed will likely keep interest rates unchanged at the meeting this week.
USD/CAD key events today
- Federal Funds Rate
- FOMC Statement
- FOMC Press Conference
USD/CAD technical outlook: Bears struggle to break out of consolidation
On the technical side, the USD/CAD price remains in a tight range between the 1.3800 support and the 1.3900 resistance. After a sharp decline, bearish momentum weakened when the price reached the 1.3800 support. The RSI made a bullish divergence, signaling a looming reversal.
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Within the range, the price trades nearer the support, meaning bears might attempt a breakout. A break below the range support will confirm a continuation of the previous downtrend. On the other hand, if support holds firm, bulls will return to retest the resistance. Given the RSI divergence, a bullish breakout is more likely. Such a move would allow USD/CAD to retest the 1.4100 resistance.
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