The USD/CAD price analysis shows continued uncertainty about Trump’s tariff policies that have caused wild fluctuations. The Canadian dollar strengthened as markets doubted a near-term tariff on Canadian goods. The currency also got support from a monthly inflation number stronger than expected.

Since Trump took office on Monday, USD/CAD  has experienced wild swings amid tariff uncertainty. At first, the loonie jumped when there was no clear guidance on any near-term tariffs. However, sentiment shifted when Trump later came out to say he was ready to impose a 25% tariff on goods from Canada and Mexico as soon as Feb 1. 

However, by Wednesday, market participants were again optimistic. Canadian Prime Minister Justin Trudeau noted that the government would respond appropriately to Trump’s tariffs. Moreover, he pointed out that the US needs Canada to prosper. Therefore, such tariffs would also hurt the US economy. 

Elsewhere, data on Tuesday revealed that inflation in Canada fell by 0.4%, bigger than the forecast of a 0.7% decline. Nevertheless, the annual figure eased to 1.8%, solidifying bets for a January Bank of Canada rate cut. 

Meanwhile, the dollar remained steady, with traders awaiting more policy clues from Trump later in the day.

USD/CAD key events today

• Canada core retail sales m/m
• Canada retail sales m/m
• US unemployment claims
• President Trump speaks

USD/CAD technical price analysis: Consolidating in wide range

(Click on image to enlarge)

USD/CAD 4-hour chart

On the technical side, the USD/CAD price failed to break its range resistance and dropped back to the channel support. At the same time, it broke below the 30-SMA while the RSI dipped below 50, suggesting a stronger bearish sentiment. Recent candles show a significant surge in volatility because they are much bigger than previous ones. If this continues, the price will eventually break out of its consolidation to start trending up or down. 

Currently, bears are approaching the range support. If the price breaks below this level, it will likely reach the 1.4201 support. This will lead to a lower low and the start of a downtrend. On the other hand, bulls might resurface at the range support to push the price higher. In this case, USD/CAD would try to break above the range resistance.

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