FX.co ★ USD/CAD

President Trump made waves with threats to impose steep tariffs on some of the U.S.'s closest trading partners. While these threats remained largely unfulfilled, recent signs suggest that Trump is preparing to follow through with his tariff policies. The tariffs are intended not only to alter the trade behavior of foreign nations but also to support the U.S. government's finances, which are under strain due to projected tax cuts and rising deficits. In particular, Trump’s trade policies are viewed as a way to curb the U.S.'s significant trade imbalance and reduce the impact of government spending. However, the looming trade war has raised concerns about global economic growth, with risks of a slowdown that could negatively impact currencies tied to commodities, such as the Canadian Dollar (CAD). Canada, as the largest oil exporter to the U.S., faces particular vulnerabilities, since a drop in crude oil prices tends to hurt the CAD’s value.

The currency pair has shown resilience, holding steady around the 1.3700 level, a significant psychological barrier. The pair recently tested a one-month high and is now facing important resistance around 1.3730. A breakout above this level could push the pair toward 1.3788, marking the next key target for traders. However, caution is advised as the Relative Strength Index (RSI) has moved above 70, indicating that the pair may be entering overbought territory. For traders, this signals that while bullish sentiment remains strong, the risk of a pullback is increasing. Monitoring both the fundamental impact of trade policies and oil price fluctuations, alongside key technical indicators like RSI and resistance levels, is essential for making informed decisions in this volatile market.