- Trump announced a 25% tariff on steel and aluminum imports.
- The outlook for the US economy is brightening with additional tariffs.
- Economists believe US inflation will be slower, increasing by 0.3% in January.
The USD/CAD price analysis shows CAD sellers returning to the market amid fears of the impact of Trump’s new tariffs on Canada’s economy. However, trading remained thin as market participants eagerly waited for the crucial US consumer inflation report due on Wednesday.
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The Canadian dollar eased after Trump announced a 25% tariff on steel and aluminum imports starting on 4th March. Canada got a one-month relief from a 25% tariff on all its goods to the US. However, the country is also a major exporter of steel and aluminum to the US. Therefore, the new tariffs have dimmed the outlook for Canada’s economy. Moreover, the Bank of Canada will be under a lot of pressure to lower borrowing costs and support the economy.
Meanwhile, the outlook for the US economy is brightening with additional tariffs. Duties on imports will force consumers to buy local products, boosting economic demand. At the same time, local production will increase, further supporting the economy.
Meanwhile, market participants expect the US consumer inflation report on Wednesday. Economists believe inflation will be slower, increasing by 0.3% in January. Meanwhile, the annual figure might mirror the previous month’s 2.9% increase. An upbeat report will boost USD/CAD as it will imply a hawkish Fed and a monetary policy divergence between the US and Canada.
USD/CAD key events today
- Fed Chair Powell Testifies
USD/CAD technical price analysis: Small-bodied candles indicate indecision
On the technical side, the USD/CAD price has paused near the 1.4300 support level. The pause comes after a sharp decline that pushed the price well below the 30-SMA. At the same time, the RSI dropped below 50, indicating stronger bearish momentum.
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However, bears were unable to break below the 1.4300 support, allowing the 30-SMA to catch up. The pause also allowed bulls to resurface and break above the 30-SMA. However, the break was weak as the price is making small-bodied candles. This is a sign that there is still indecision at this level, with bears and bulls fighting for control.
If bulls win, the price will climb higher to retest the 1.4450 resistance level. On the other hand, if bears win, the price will break below the 1.4300 support to make lower lows.
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