- The USD/CAD forecast shows some relief for the Canadian dollar.
- Trump excluded automakers in Canada from the 25% tariff for a month.
- Market participants worried about the impact of Trump’s tariffs on the US economy.
The USD/CAD forecast shows some relief for the Canadian dollar as market participants expect a tariff relief on Canada. At the same time, the currency got support as the US dollar fell due to a dimmer outlook for the US economy.
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The Canadian dollar has collapsed since Trump implemented a 25% tariff on Canadian imports. The outlook for Canada’s economy and monetary policy shifted, with experts predicting tough times ahead. This would force the Bank of Canada to assume a more aggressive stance on rate cuts.
However, there was relief on Wednesday after a phone call from the US to Canada. According to reports, Trump said Canada had yet to meet the conditions to pause tariffs. However, he later softened his stance, excluding automakers from the tariff for a month. This was also a sign that the two countries could negotiate better trading deals to avoid a prolonged trade war.
Elsewhere, the greenback fell as market participants worried about the impact of Trump’s tariffs on the US economy. Already, data has shown a slowdown that has increased rate cut expectations. The ongoing trade wars will eventually hurt the economy. At the same time, tariffs might reheat inflation, forcing the Fed to keep rates elevated.
Meanwhile, US data on Wednesday revealed slower-than-expected private job growth. On the other hand, business activity in the services sector rebounded.
USD/CAD key events today
USD/CAD technical forecast: Bearish engulfed turns the table
On the technical side, the USD/CAD price has reversed after peaking near the 1.4501 resistance level. The price now sits far below the 30-SMA, showing bears are in the lead. At the same time, the RSI trades below 50, indicating solid bearish momentum.
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The previous bullish trend paused when the price neared the 1.4501 resistance level. While the price made higher highs, the RSI made lower ones. This created a bearish divergence that signaled weaker momentum and a looming reversal. Soon after, the price made a bearish engulfing candlestick pattern that pushed USD/CAD below the 30-SMA.
Bears are now facing the 1.4301 support level. Here, bulls might return to retest the 30-SMA. If it holds firm, the downtrend will continue below 1.4301.
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