- Trump plans to impose a 25 percent tariff on all goods from Canada.
- The dollar rose as Trump’s tariffs will help boost local businesses.
- Traders are keeping an eye on the upcoming minutes of the FOMC meeting.
The USD/CAD outlook points to a sharp bullish turn as the greenback rises and the loonie falls after Trump’s tariff promises. At the same time, market participants were waiting for more indications of a Fed rate cut from the minutes of the FOMC policy meeting.
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The dollar rallied on Tuesday after Trump said he would impose tariffs on goods from China, Mexico and Canada. It plans to impose a 25% tariff on all goods from Canada. The news was a big blow to the Canadian dollar as Canada exports almost 75% of its goods to the US. Consequently, the tariffs will hurt the Canadian economy, weighing on the local currency.
Initially, the Canadian dollar rallied after upbeat data last week reduced the likelihood of a massive rate cut by the Bank of Canada in December. However, with Trump as US president, there could be a significant slowdown in the economy in the near future. Therefore, the BoC may be forced to cut rates to boost growth.
On the other hand, the dollar jumped on the announcement of tariffs, which will help boost local businesses. Trump’s goal is to boost economic growth in the US, making it bigger than other major economies, especially China. Therefore, his policy is bullish for growth and the dollar. Moreover, increased economic demand is likely to cause a rise in inflation that will force the Federal Reserve to pause interest rate cuts.
Meanwhile, traders are keeping an eye on the upcoming FOMC meeting minutes. The Fed’s November meeting came immediately after Trump’s victory. So markets will wait to see if this has led to a more cautious tone and a gradual outlook for rate cuts.
USD/CAD Key Events Today
- US CB Consumer Confidence
- Minutes of the FOMC meeting
USD/CAD Technical Outlook: The uptrend continues after the bears failed to break 1.3951
From the technical side, USD/CAD the price made a strong bullish candle that broke above the resistance at 1.4100 to make a new high. Initially, the bears took control by breaking below the 30-SMA and the bullish trend line. However, despite several attempts, the price could not break the support level of 1.3951.
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Consequently, the bulls re-emerged and broke above the SMA. Moreover, they broke the previous high at 1.4100 to make a higher high. This signaled a continuation of the bullish trend that could soon reach the key psychological level of 1.4200.
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