15/04/25

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The USD/CAD currency pair is facing renewed selling pressure as the US dollar continues to be weakened by various economic concerns. The prevailing anxieties surrounding a possible recession, speculation about potential rate cuts by the Federal Reserve, and an overall positive sentiment in risk markets are contributing to this downward trend. Traders are also holding back ahead of the upcoming Canadian consumer inflation report, which could further influence market dynamics.

On Tuesday, the USD/CAD pair saw fresh sellers emerge following a slight bounce that pushed it just above the 1.3900 level. The move brought the pair close to its lowest point since November 2024. Key factors affecting the US dollar include heightened tensions in the US-China trade relationship. China’s recent decision to raise tariffs on US goods to 125% in response to increased US tariffs has stoked fears regarding the potential impact on the US economy, further driving the dollar lower.

Expectations of more aggressive policy easing by the Federal Reserve — potentially involving multiple rate cuts in the near future — have kept bullish sentiments in check for the dollar. This expectation arises from concerns about an economic slowdown induced by ongoing trade disputes. Conversely, an improvement in global risk sentiment followed a White House announcement exempting certain electronics from tariffs, providing a boost to equity markets and adding further pressure on the dollar.

Nevertheless, there are signs that market optimism may be tempered by the announcement of potential future tariffs on sectors such as pharmaceuticals and semiconductors. Additionally, lower crude oil prices may pose challenges for the Canadian dollar, limiting the Loonie’s ability to strengthen against the USD.

In terms of technical analysis, the recent drop below the 200-day Simple Moving Average at the 1.4000 level has reinforced bearish sentiment. However, the daily Relative Strength Index indicates slightly oversold conditions, suggesting that some level of near-term consolidation or a modest recovery could be in the cards.

Key support for the USD/CAD pair may come from the 1.3830-1.3825 region, while a sustained drop below the 1.3800 level could intensify the downtrend. Conversely, a breakthrough above the 1.3900 level might spark a short-covering rally, potentially steering the pair back toward the critical 200-day SMA at the 1.4000 level. If that level is decisively surpassed, it would signal a potential turnaround for the USD/CAD trajectory.