The USDCAD exchange rate has the potential for volatility as markets absorb tariffs.
USDCAD – Daily Chart
The USD v CAD made a sharp move higher on the Trump tariff launch but the pair has moved back to the previous highs. The rejection at higher levels sets up the next path with an uptrend line holding the bullish trend in place.
The economic calendar is light this week with the US waiting for ADP employment figures and an ISM services PMI release late on Wednesday. But, the market is ignoring short-term, lagging data as traders try to digest the effect of tariffs.
The tariff issue took another twist on Monday after President Trump said he would pause tariffs on Canada and Mexico for one month. Both countries have pledged to tighten their borders and Trump has applied a grace period on his 25% tariffs.
Canada and Mexico both agreed to dispatch 10,000 additional troops to the border in order to support police in their fight against illegal migration and drug trafficking.
Trump wrote on social media that he had had a “very friendly” conversation with Mexico President Claudia Sheinbaum and that the soldiers “will be specifically designated to stop the flow of fentanyl, and illegal migrants into our Country”.
Markets are in a state of confusion as tariffs could upset the global economy and worsen the deflationary effect on global countries. Trump also reiterated his desire for Canada to become the 51st state of America. Canada’s Trudeau is against such an idea, but he was facing a potential vote of no confidence in his leadership this month. Trump’s moves were created due to trade imbalances with the likes of Canada. However, many analysts worry about supply and demand issues and the deflationary trend of tariffs. Trump has backed off on tariffs for now but that could change at any time.
Traders should keep an eye on fx trades as the changing environment could lead to swings and new trends.
