USD/CAD Outlook: Loonie Sinks to 2003 Lows on Trum Tariff…

• US President Donald Trump introduced the beginning of tariffs on Canada.

• Trump’s tariffs will strain the Financial institution of Canada to chop rates of interest. 

• Canada’s economic system contracted by zero.2%.

The USD/CAD outlook signifies a looming commerce warfare between the US and Canada after Trump applied a 25% tariff on Canadian items. On the similar time, Canada’s economic system stays weak, placing strain on the Financial institution of Canada to decrease borrowing prices. Therefore, the value examined recent multi-decade highs close to 1.4800 space. 

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US President Donald Trump introduced the beginning of tariffs on Canada, Mexico, and China on February 4th. The US will impose a 25% tariff on items from Canada, possible resulting in a drop in demand and a commerce warfare between the 2 nations. Prime officers in Canada have emphasised their potential to reply appropriately to any heavy tariffs. Furthermore, Canada promised to retaliate after Trump’s announcement, which means a commerce warfare. 

The 25% tariff will harm an already fragile economic system, growing strain on the Financial institution of Canada to chop rates of interest. Notably, knowledge on Friday revealed that Canada’s economic system contracted by zero.2%, a bigger-than-expected decline. The economic system has weakened because of excessive rates of interest, forcing policymakers to decrease borrowing prices aggressively.

Tariffs will solely worsen the scenario, resulting in a collapse within the Canadian greenback. Canada’s foreign money fell by 1% in January, its fifth month of declines. Trump’s tariffs would possibly prolong this decline, pushing USD/CAD larger.

USD/CAD key occasions at present

USD/CAD technical outlook: Bulls set off a stable vary breakout

On the technical aspect, the USD/CAD value has lastly damaged out of consolidation. Bulls broke above the 1.4450 vary resistance stage with a stable candle. Furthermore, the value made an enormous hole above the 1.4600 psychological stage, indicating a pointy improve in bullish momentum. On the similar time, the RSI jumped to the overbought stage. 

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The bullish transfer has paused close to the 1.4801 stage. Nonetheless, the value trades far above the 30-SMA and would possibly pause or pull again because the SMA catches up. This may even enable the value to fill the hole earlier than persevering with larger. 

A retreat would possibly pause on the 1.4600 stage. If bulls are nonetheless robust after a pullback, the value will possible break above the 1.4801 stage to make a better excessive, confirming a brand new bullish pattern. Bears will solely take management if the value breaks under the 30-SMA.

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