USD/CAD Spikes Ahead of US CPI As Trump Ends Trade Talks with Canada

USD/CAD Rises After Trump Ends Canada Trade Talks

Currency markets were largely treading water during Asian trade ahead of today’s highly anticipated US inflation figures — until President Trump announced via Truth Social that he had terminated trade talks with Canada, in response to what he described as a fraudulent Canadian advert featuring former US President Ronald Reagan criticising tariffs.

View related analysis:

“Based on their egregious behavior, ALL TRADE NEGOTIATIONS WITH CANADA ARE HEREBY TERMINATED.” Trump via Truth Social

Chart analysis by Matt Simpson - Source: LSEG

The advert in question was launched by the province of Ontario (Canada) and uses a 1987 speech by Ronald Reagan in which he warned that “high tariffs inevitably lead to retaliation by foreign countries … businesses and industries shut down, and millions of people lose their jobs”.

USD/CAD spiked around 50 pips in the minutes that followed, as traders bet that renewed tensions between the US and Canada were a net negative for the Canadian dollar versus the US dollar. While the loonie also slipped slightly against the British pound and euro, the broader impact remains limited at this stage. Notably, USD/CAD was the only major pair to exceed its daily ATR (average true range) — a rare event, especially ahead of a key US inflation release.

USD/CAD Technical Analysis: US Dollar vs Canadian Dollar

The 1-hour chart shows that prices accelerated higher following Trump’s latest trade announcement, after establishing a double bottom around the weekly S1 pivot point at 1.3975.

On the daily chart, USD/CAD remains in a firm uptrend, having recently found support at its 20-day EMA. Should prices close the week near current levels, a three-bar bullish reversal pattern (morning star) would have formed.

With US CPI data still to come, however, it seems unlikely the pair will settle exactly here. A stronger-than-expected CPI print would likely see USD/CAD extend higher towards 1.41, confirming a breakout from the bullish flag on the daily chart. The flag target sits near 1.4123, with 1.4080 and 1.41 acting as interim resistance levels.

Even if CPI comes in softer, it’s hard to make a convincing bearish case for USD/CAD given the latest trade developments. Dips are therefore likely to be viewed as buying opportunities over the near term.

Only a particularly weak inflation reading, triggering a broad US dollar sell-off, would put 1.3975 at risk. A break beneath that level would expose a deeper retracement towards the high-volume node (HVN) around 1.3948.

Chart analysis by Matt Simpson - data source: TradingView USD/CAD

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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