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USD/CAD Spikes to Fresh Monthly High as Trump Prepares Canada Tariff

Article By: ,  Strategist
January 21, 2025 5:05 PM

US Dollar Outlook: USD/CAD

USD/CAD spikes to a fresh monthly high (1.4517) as US President Donald Trump plans to impose a 25% tariff on Canadian goods starting February 1, and the exchange rate may continue to track the positive slope in the 50-Day SMA (1.4217) as it still holds above the moving average.

USD/CAD Spikes to Fresh Monthly High as Trump Prepares Canada Tariff

USD/CAD may further retrace the decline from the 2020 high (1.4668) as it attempts to break out of the range bound price action from earlier this month, and developments coming out of the US may continue to sway the exchange rate as the Trump Administration unveils an ‘America First Trade Policy.’

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It remains to be seen if authorities in Canada will respond to the upcoming tariff as the Bank of Canada (BoC) acknowledges that ‘there was a range of views on how much further the policy rate would need to be reduced,’ and the central bank may take further steps to support the economy as ‘members agreed that they would likely be considering further reductions in the policy rate at future meetings.’

In turn, the BoC may stick to its rate-cutting cycle in 2025 especially as Canada’s Consumer Price Index (CPI) unexpectedly slows to 1.8% in December from 1.9% per annum the month prior, and the Canadian Dollar may face headwinds ahead of the next BoC meeting on January 29 as the central bank unwinds its restrictive policy.

With that said, USD/CAD may continue to trade to fresh monthly highs should it track the positive slope in the 50-Day SMA (1.4216), but failure to defend the monthly low (1.4261) may push the exchange rate below the moving average for the first time since October.

USD/CAD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/CAD Price on TradingView

  • USD/CAD registers a fresh monthly high (1.4517) following the failed attempt to close below the 1.4280 (38.2% Fibonacci extension) to 1.4299 (April 2020 high) zone, with a breach above 1.4590 (78.6% Fibonacci extension) bringing the 2020 high (1.4668) on the radar.
  • Next area of interest comes in around 1.4750 (100% Fibonacci extension), but USD/CAD may threaten the positive slope in the 50-Day SMA (1.4216) if it fails to hold above the monthly low (1.4261).
  • A close below the 1.4280 (38.2% Fibonacci extension) to 1.4299 (April 2020 high) zone may push USD/CAD towards the 1.4170 (23.6% Fibonacci extension) to 1.4210 (78.6% Fibonacci extension) region, with the next area of interest coming in around 1.4000 (61.8% Fibonacci extension) to 1.4040 (23.6% Fibonacci retracement).

Additional Market Outlooks

GBP/USD Pullback Pushes RSI Toward Oversold Territory

AUD/USD Vulnerable amid Struggle to Push Above Weekly High

USD/CHF Snaps Bearish Price Series to Hold Above Weekly Low

US Dollar Forecast: USD/CAD Susceptible to Test of Monthly Low

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

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