Could the USDCAD recover in the short term?
Fundamental Analysis
The Canadian dollar declined, trading around the nine-year low reached on January 17th, after U.S. President Trump announced plans to impose tariffs of up to 25% on Canada starting next month.
These tariffs are expected to significantly restrict demand from Canada's largest export destination, reducing dollar inflows. In addition, Trump reinforced the plan to increase U.S. domestic energy production, threatening to undercut Canadian energy exports by forcing producers to lower selling prices.
On the other hand, Canada's inflationary pressures dropped, with headline inflation easing to 1.8% in December, versus the forecasted 1.9%. Moreover, the Bank of Canada's desired inflation measure aligned with projections at 2.5%, reinforcing market expectations of further rate cuts this year.
Technical Analysis
Price consolidates around 1.4375, trading in a range between 1.4300 and 1.4500 with the EMAs moving laterally, indicating consolidation in the short term.
If the pair fails to break the resistance at 1.4500, the price could continue to the downside in the short term and fall to the next support level at 1.4300 before retesting the support at 1.4200.
On the contrary, if USDCAD recovers and closes above the 1.4500 resistance level, the price could target the next psychological level at 1.4600.
The Canadian dollar declined, trading around the nine-year low reached on January 17th, after U.S. President Trump announced plans to impose tariffs of up to 25% on Canada starting next month.
These tariffs are expected to significantly restrict demand from Canada's largest export destination, reducing dollar inflows. In addition, Trump reinforced the plan to increase U.S. domestic energy production, threatening to undercut Canadian energy exports by forcing producers to lower selling prices.
On the other hand, Canada's inflationary pressures dropped, with headline inflation easing to 1.8% in December, versus the forecasted 1.9%. Moreover, the Bank of Canada's desired inflation measure aligned with projections at 2.5%, reinforcing market expectations of further rate cuts this year.
Technical Analysis
Price consolidates around 1.4375, trading in a range between 1.4300 and 1.4500 with the EMAs moving laterally, indicating consolidation in the short term.
If the pair fails to break the resistance at 1.4500, the price could continue to the downside in the short term and fall to the next support level at 1.4300 before retesting the support at 1.4200.
On the contrary, if USDCAD recovers and closes above the 1.4500 resistance level, the price could target the next psychological level at 1.4600.
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