USDCAD in Focus as PMI Data and Trade Tensions Drive Market Sentiment

Markets are gearing up for the latest round of flash PMI data, which will provide fresh insights into economic activity across key regions, including the UK, Eurozone, Canada, and the U.S. These figures will be closely watched for signals on business sentiment, production trends, and potential shifts in monetary policy expectations. With global growth concerns still in focus, any divergence in manufacturing and services performance could influence market sentiment and currency movements. Meanwhile, USDCAD continues to face downside pressure amid trade tensions and shifting investor sentiment, highlighting the broader uncertainty surrounding economic outlooks.

Friday 09:00 am (GMT+2) – UK: Retail Sales m/m (GBP)
Friday 10:15 am (GMT+2) – France: Flash Manufacturing PMI (EUR)
Friday 10:15 am (GMT+2) – France: Flash Services PMI (EUR)
Friday 10:30 am (GMT+2) – Germany: Flash Manufacturing PMI (EUR)
Friday 10:30 am (GMT+2) – Germany: Flash Services PMI (EUR)
Friday 11:30 am (GMT+2) – UK: Flash Manufacturing PMI (GBP)
Friday 11:30 am (GMT+2) – UK: Flash Services PMI (GBP)
Friday 15:30 (GMT+2) – Canada: Retail Sales m/m (CAD)
Friday 16:45 (GMT+2) – USA: Flash Manufacturing PMI (USD)
Friday 16:45 (GMT+2) – USA: Flash Services PMI (USD)

After reaching a high of 1.47920 on February 3, capping off four consecutive months of higher highs and higher lows, the USDCAD experienced a sharp decline, shedding over 4% of its value. This downturn was driven by a combination of fundamental and technical factors that collectively pressured the currency pair lower. Key among these was President Trump’s announcement of 25% tariffs on Canadian goods, followed by a one-month delay in implementation. This development, coupled with a failure swing and the formation of a “Death Cross” (a double crossover of the 20-period moving average below the 50-period moving average), significantly weighed on the USDCAD exchange rate.

From a technical perspective, the pair is currently trading below both the 20-period and 50-period Exponential Moving Averages (EMAs), signaling a bearish sentiment in the market. Momentum indicators further reinforce this negative outlook. The Momentum Oscillator remains below the 100 level, pointing to continued downside pressure, while the Relative Strength Index (RSI) holds below 50, reflecting sustained selling interest. These technical signals suggest that the USDCAD may face further downward pressure in the near term.

Should the bulls take market control, traders may direct their attention toward the four potential resistance levels below:

1.42445: The initial resistance level is set at 1.42445, which mirrors the daily high marked February 19.

1.43180: The second price target is identified at 1.43180, representing the weekly resistance, R1, calculated using the standard Pivot Points methodology.

1.44679: The third price objective is determined at 1.44679, which corresponds with the 23.6% Fibonacci Retracement drawn from 1.34186 to 1.47920.

1.47920: An additional price target is established at 1.47920, representing the peak from February 3.

Should the bears maintain market control, traders may consider the four potential support levels listed below:

1.40918: The initial support level is seen at 1.40918, corresponding to the 161.8% Fibonacci Extension drawn from the low point, 1.41501, to the high point, 1.42445.

1.40082: The second support level is estimated at 1.40082, representing the weekly support, S2, estimated using the standard Pivot Points methodology.

1.39432: The third support level is identified at 1.39432, reflecting the 61.8% Fibonacci Retracement drawn from 1.34186 to 1.47920.

1.38446: An additional downside target is 1.38446, mirroring the 423.6% Fibonacci Extension drawn from the low point, 1.41501, to the high point, 1.42445.

President Trump’s tariffs are forcing Canada to reevaluate its economic dependence on the U.S. With 80% of Canadian exports flowing south, even the threat of tariffs has shaken investor confidence, slowed business investment, and raised concerns about job losses and economic stagnation. Industries like manufacturing and energy, heavily reliant on cross-border supply chains, face rising costs and uncertainty. While the U.S. also benefits from Canadian exports, the trade imbalance gives Washington leverage. Canada now faces a critical challenge: diversifying trade, improving infrastructure, and reducing regulatory barriers to build a more resilient economy.

As USDCAD navigates a shifting landscape of economic uncertainty and trade tensions, both fundamental and technical factors continue to shape its trajectory. The recent downturn highlights vulnerabilities in Canada’s trade reliance, while technical indicators point to persistent bearish momentum. With key support and resistance levels in focus, market participants will be closely monitoring upcoming economic data and policy developments for further direction. In the near term, volatility is likely to remain elevated as traders assess the broader implications of shifting trade dynamics and macroeconomic conditions.