USDCAD Rallies Amid US-Canada Trade War

The Canadian Dollar (CAD) remains slightly weaker, with USDCAD trading marginally higher. Short-term technical signals lean bearish for the USD after a sharp fall on Tuesday. Support at 1.4370 was broken, suggesting a possible move lower toward 1.4200/50, though price action may be choppy. If the USD pushes back above the upper 1.43s, it could regain 1.4425/50.

Fundamental Factors Affecting CAD

Following a meeting between US automakers and the White House, the US has granted Canada a one-month exemption from auto sector tariffs. However, the broader tariff environment remains uncertain, with Canada still facing an estimated effective tariff rate of 14%-17% on exports. Additional changes could come as steel, aluminum, and border tariffs are reassessed in the coming weeks.

Key Takeaway for Traders

The CAD’s reaction to the auto tariff reprieve has been muted, as the market had already priced in a tariff regime of around 10-15%. Canada’s trade data release at 8:30 AM ET could influence CAD movement. Traders should watch whether USDCAD sustains losses below 1.4370 or rebounds toward 1.4425/50.

USDCAD – D1 Timeframe

Speaking from the technical point of view, based on the price action on the daily timeframe chart of USDCAD, we notice the recent break of structure and the demand zone responsible for the bullish momentum. We also can see that there is a presence of an FVG (Fair Value Gap) and trendline support. The Fibonacci retracement tool would also reveal that the demand zone falls within the critical region between the 76% and 88% levels.

USDCAD – H4 Timeframe

The only hidden detail clearly visible on the 4-hour timeframe chart of USDCAD is the sell-side liquidity resting just below the inducement and right in front of the FVG. Correlating this with the confluence from the trendline support, rally-base-rally demand, and the Fibonacci retracement levels, we expect price to deliver a bullish reaction from the highlighted zone.

Analyst’s Expectations: 

Direction: Bullish

Target- 1.45940

Invalidation- 1.41703

CONCLUSION

You can access more trade ideas and prompt market updates on the telegram channel.