FX.co ★ USD/CAD

The US Dollar (USD) is up 0.2% to approximately 1.3870 against the Canadian Dollar (CAD) in the European session on Wednesday. The Loonie pair rises following a poor performance by the Canadian Dollar due to trade disputes between the US and Canada. As noted in a statement last week by US President Donald Trump, 50% tariffs on various Canadian products will take effect Saturday following the lack of a trade agreement between the two countries. In response, Canadian PM Mark Carney declared this week that Canada will impose tariffs on September 8, CNBC reports. Danske Bank strategists note that trade tensions between the US and Canada have intensified amid Canada's attempt to retaliate against the US's recent moves. According to Danske Bank, "trade tensions have ratcheted up further in light of Canada's decision to impose retaliatory tariffs up to 50% on USD 20 billion of goods imported from the US after the announcement by Trump of raising taxes on cars and auto parts from Canada." Danske Bank observes that while the move is "proportional and designed to reinforce the position of Canada during negotiations," it brings "more uncertainties for companies on both sides of the border and more pressure on prices and logistics." Additionally, "as Canada goes tit for tat, the Trump administration is said to consider other measures against it." Meanwhile, the USD index trades marginally higher on the back of the release of the US Personal Consumption Expenditures Price Index (PCE) data for July, due tomorrow at 12:30 GMT. The core PCE inflation rate in the US, which is closely watched by Fed policymakers, is forecast to remain stable at 3.3% YoY, while the month-on-month rise would stay unchanged at 0.2%, above last month's 0.1%.

USD/CAD is currently trading near 1.3869 on the daily time frame, indicating a cautious bearish outlook. The price below the 20-period EMA at 1.3909 and the 50.0% Fibonacci level at 1.3901. USD/CAD has moved below the midpoint of its recent upward move, indicating that bears are currently controlling the near-term market trend. Another indicator supporting the bearish view is the relative strength index at 41.7, currently below the 50 mark, indicating weak upside momentum. The initial significant downside level to watch out for is the 61.8% Fibonacci retracement at 1.3819. A breakdown of this level would confirm the bearish pattern and suggest that the current rally lacks more upside momentum. In such a case, the USD/CAD may head towards the next critical support level in the form of the 78.6% Fibonacci retracement level at 1.3703. Further bearish action beyond 1.3703 may shift focus to the next downside target at the 100% retracement level of 1.3555. In terms of positive aspects, the 1.3901-1.3909 range is the first level of resistance. It consists of the 50.0% Fibonacci retracement level and the falling 20-period exponential moving average, which represents the first line of defense against a possible recovery. Any breakout beyond 1.3909 would lower the immediate bearish pressure and shift focus to the 38.2% Fibonacci retracement level of 1.3983, while further advance would aim towards the 23.6% Fibonacci retracement level of 1.4084. In general, the USD/CAD pair has a bearish bias while trading below 1.3901 and 1.3909. Any breakdown below 1.3819 would add to the bearish sentiment and push the price down towards 1.3703, whereas any rally beyond 1.3909 would be needed to change the current picture.