USD/CAD Forecast: Bounces from Range Support

• During the session on Thursday, we have seen the US dollar rally a bit against the Canadian dollar as we had touched the bottom of the range.
• This is a market that will continue to move based on the latest tariff talk, and it is worth noting that the Canadians more than anybody else have push back against the Americans and the Donald Trump administration.
• Because of this, it’s very possible that the Canadian dollar gets punished, as trade tariffs could get implemented in a fairly strict manner.
• After all, we have just seen Donald Trump levy tariffs against foreign automakers, which definitely targets Ontario, as a lot of US cars are made in that province.

Tit for tat

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Unfortunately for this currency pair, you will probably continue to see a lot of tit for tat trade tariffs, but in the end, the Canadian simply don’t have the size to affect the US economy very much. There are some targeted areas that they can attack, but ultimately the economy is far too small to make a real dent into the United States.

Furthermore, Canada sells something like 83% of its exports to the United States, so one of the biggest problems that the Canadians have at the moment is that they are so heavily reliant on the Americans. In other words, despite the fact that they probably will continue to fight back, the reality is that cutting off the Americans or having the Americans go somewhere else is the same thing as kicking 80% of your customers out of your place of business. They just cannot afford to do that at the moment.

Because of this, I do think that we will stay somewhat range bound until this is all sorted out, but we are getting fairly close to the end. It will be interesting to see what Donald Trump does on April 2, because that is what he has been referring to as “Liberation Day”, which is when a bevy of tariffs go into effect against multiple countries, not just Canada. Short-term traders will continue to by the dips until this is resolved.

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