Trump’s Tariff Proposal Sparks Bullish Momentum for USDCAD

The USDCAD currency pair has experienced a sharp reversal after reaching a low of 1.34186 in October, signaling a bullish shift driven by key technical patterns and fundamental developments. A non-failure swing pattern, coupled with the breakout above the crucial 1.36466 level, has paved the way for further upside potential. The emergence of a “Golden Cross,” where the 20-period EMA crossed above the 50-period EMA, underscores the growing bullish momentum. This momentum has been further bolstered by President-elect Donald Trump’s announcement of steep tariffs on Canadian and Mexican goods. Indicators such as the Momentum oscillator and RSI continue to signal a strong upward trajectory, suggesting sustained bullish pressure in the near term.

Wednesday 2:30 am (GMT+2) – Australia: CPI y/y (AUD)
Wednesday 3:00 am (GMT+2) – New Zealand: Official Cash Rate (NZD)
Wednesday 15:30 (GMT+2) – USA: Unemployment Claims (USD)
Wednesday 17:00 (GMT+2) – USA: Core PCE Price Index m/m (USD)
Thursday All Day – Europe: German Prelim CPI m/m (EUR)
Friday 15:30 (GMT+2) – Canada: GDP m/m (CAD)
Saturday 3:30 am (GMT+2) – China: Manufacturing PMI (CNY)

After reaching a low of 1.34186 in October, the USDCAD pair has sharply reversed, driven by a bullish reversal pattern known as a non-failure swing in technical analysis. Specifically, the trough at 1.34186 dropped below the previous trough, and prices subsequently exceeded the key support level of 1.36466, paving the way for further appreciation.
The formation of a “Golden Cross,” where the 20-period Exponential Moving Average (EMA) crossed above the 50-period EMA, also contributed to the positive momentum for USDCAD. This upward momentum intensified after President-elect Donald Trump announced he would impose steep 25% tariffs on goods coming from Canada and Mexico.
Furthermore, the Momentum oscillator indicates values above the 100 threshold, while the Relative Strength Index (RSI) shows values greater than 50. Both indicators suggest that positive momentum is likely to continue in the near term.

If buyers maintain control of the market, traders may shift their focus to the following four potential resistance levels:
1.41770: The first level of resistance is seen at 1.41770, which aligns with yesterday’s daily high.
1.43949: The second price target is determined at 1.43949, corresponding to the 261.8% Fibonacci Extension drawn from the swing high, 1.41048, to the swing low, 1.39262.
1.46850: The third price target is established at 1.46850, representing 423.6% Fibonacci Extension drawn from the swing high, 1.41048, to the swing low, 1.39262.
1.50290: An additional price objective is estimated at 1.50290, mirroring a trough marked on the monthly timeframe.

If sellers take control of the market, traders may focus on the following four key support levels:
1.40009: The initial support level is seen at 1.40009, representing the weekly Pivot Point, PP, calculated using the standard methodology.
1.39262: The second support level is positioned at 1.39262, aligning with a swing low from November 25.
1.38295: The third downside target is noted at 1.38295, corresponding to the weekly support, S2, calculated using the standard Pivot Points methodology.
1.37083: An additional downside target is determined at 1.37083, reflecting the 61.8% Fibonacci Retracement drawn from the swing low 1.34186 to the swing high 1.41770.

The Canadian dollar may face further weakness after reaching a 4.5-year low against the US dollar, driven by concerns over Donald Trump’s proposed tariffs on Canada, according to analysts. Markets are beginning to factor in potential trade-related economic risks for Canada, with USDCAD potentially rising to 1.50 within a year if tariffs are enacted. In the short term, central bank commentary is expected to play a key role in shaping the exchange rate’s trajectory.

In conclusion, the USDCAD pair has demonstrated a strong bullish reversal, supported by technical patterns such as the non-failure swing and the “Golden Cross,” as well as fundamentals, including trade-related concerns and potential tariffs. Key resistance levels indicate further upside potential if bullish momentum continues, while support levels provide critical benchmarks for downside risk. With high-impact economic events on the horizon, including Canada’s GDP release and US employment data, traders should remain vigilant as these factors could significantly influence the pair’s trajectory in the near term.