Canadian Dollar stays vulnerable as US-Canada trade war heats up

The Canadian Dollar remains under pressure as trade tensions between Washington and Ottawa persist.
Canada retaliates against US tariffs with duties of up to 50% on certain imports.
Investors await Kevin Warsh’s Jackson Hole speech for fresh clues on US monetary policy.

Ghiles Guezout FXStreet

USD/CAD trades around 1.3870 on Thursday, down a modest 0.05% on the day at the time of writing. The Canadian Dollar (CAD) is struggling to fully benefit from the stability of the US Dollar (USD), as escalating trade tensions between the United States (US) and Canada continue to fuel concerns over the Canadian economic outlook.

Trade relations between the two countries remain in focus after US tariffs of 50% on a range of Canadian goods came into effect. The move follows the failure of negotiations between Washington and Ottawa to reach a trade agreement.

In response, Canadian Prime Minister Mark Carney announced tariffs of up to 50% on around $20 billion worth of US imports. The escalation raises concerns about a more pronounced impact of the trade dispute on Canadian economic activity and limits the Loonie’s ability to strengthen.

The Canadian Dollar, however, receives some support from Oil prices, as geopolitical risks maintain a premium in the energy market. As Canada is a major Oil exporter to the United States, resilient energy prices help limit downside pressure on its currency.

On the US side, attention turns to the Federal Reserve (Fed). Investors await Fed Chair Kevin Warsh’s speech on Friday at the Jackson Hole Symposium, looking for fresh indications about the path of interest rates.

The latest US inflation data have reinforced market caution over the monetary policy outlook. The Personal Consumption Expenditures (PCE) Price Index stands at 3.7% YoY in July, above expectations, signaling that inflationary pressures remain persistent.

Against this backdrop, the US interest-rate outlook and developments in the trade dispute between Washington and Ottawa are likely to remain the main drivers of USD/CAD in the near term, while fluctuations in Oil prices could also influence the Canadian Dollar.

USD/CAD technical analysis

In the one-hour chart, USD/CAD trades at 1.3871, holding a mildly bullish intraday bias as it consolidates above the 100-period simple moving average (SMA) at 1.3840 and the 200-period SMA at 1.3839. The pair is hovering just over nearby horizontal support at 1.3865, suggesting buyers still defend the latest pullbacks, while the Relative Strength Index (14) around 46 hints at fading but not yet bearish momentum as the pair pauses beneath overhead barriers.

On the topside, initial resistance is seen at the horizontal level of 1.3893, with a break exposing a higher cap near 1.3910. On the downside, immediate support is located at 1.3865, followed by the clustered trend supports from the 100-period SMA at 1.3840 and the 200-period SMA at 1.3839, ahead of a deeper structural floor around 1.3825.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Author

Ghiles Guezout

FXStreet

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

AUD/USD bulls regain control above 0.6950 amid USD retreat

AUD/USD regains traction and extends the previous day's bounce from the weekly low, aiming for 0.7000 in Asia on Friday. The overnight pullback in US bond yields keeps the US Dollar below an 18-month high, which in turn offers some support to the pair. Meanwhile, hawkish RBA expectations also keep the major underpinned.

USD/JPY holds gains near 158.00 after Japan's weak Household Spending data

USD/JPY clings to gains around 158.00 after data showed on Friday that Japan's Household Spending fell for the ninth straight month, undermining the Japanese Yen. Meanwhile, the US Dollar remains depressed as the overnight fall in US bond yields counters a hawkish Fed and geopolitical uncertainties, could cap any downside in the pair.

Gold remains range-bound below $4,200

Gold has given up some ground after an initial bullish attempt to reach weekly highs, returning to below the $4,200 mark per troy ounce on Friday. The US Dollar’s strong upside momentum, combined with rising US Treasury yields across the curve, seems to keep further gains in the yellow metal under scrutiny.

Week ahead: US CPI, France’s budget crisis and Q3 earnings to set the market tone

The US dollar held relatively strong this week, despite the disappointing US jobs report on October 2, which further decreased the probability of a back-to-back rate hike by the Fed at the upcoming gathering on October 28.

CFTC Report: Euro and Aussie shorts expand amid diverging signals

The week in one sentence: Euro and Australian Dollar shorts deepened in the week to October 6, while Yen longs rebuilt. In addition, Coffee buying continued, and Gold exposure remained elevated despite another price decline. Speculators turned more negative on the Euro, increasing the net exposure to around 99.3K contracts.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?