The USD/CAD currency pair set a fresh four-year high late last week, surpassing the 1.4467 mark from December. This surge comes as President-elect Donald Trump is set to be inaugurated on Monday, heightening speculation about trade policies and tariffs on Canada. The latest push saw the pair approach the high watermark levels from 2016 and 2020, inching closer to the 1.4700 mark.
The consistent bullish momentum suggests that investors are pricing the potential economic implications of Trump’s proposed tariffs on Canada. Last week, USD/CAD oscillated, with a midweek dip followed by a strong rally on Thursday and Friday, eventually closing at a new high. This bullish drive began around Q4 and was further energized by Trump’s tariff discussions in late November.
Trump’s tariffs are a significant talking point, with Bloomberg highlighting Canada’s apprehension, quoting, “Canada Braces for ‘Punch in the Face’ as Trump Takes Office.” Investors, generally wary of uncertainty, seem to be factoring in these risks, driving the USD/CAD higher. The recent trend from the weekly chart shows buyers dominating, as indicated by the long wicks on the underside of the weekly bars, suggesting strong support.
USD/CAD surges amid tariff fears
The critical resistance level to watch next is 1.4500. Should bulls maintain this momentum, the next target would be the zone between the highs from 2016 and 2020, around 1.4668 to 1.4690. If bullish momentum wanes, significant support levels to watch are at 1.4300 and 1.4200.
A breach of these levels could signal a stronger bearish move, potentially reversing the bullish trend. The imposition of tariffs could lead to significant economic shifts. A primary concern is whether energy exports from Canada would be exempt.
If not, increased oil prices could spur inflation in the U.S., complicating the Federal Reserve’s monetary policy and potentially impacting equity markets. With Trump’s inauguration imminent and uncertainties remaining, USD/CAD traders should brace for potential volatility and closely monitor these key technical levels.