The USD/CAD pair experienced significant volatility on Monday, initially plummeting following a now-debunked report from the Washington Post suggesting imminent US tariffs on major economies. This news triggered a sharp decline in the US dollar and US Treasury yields. However, the dollar rapidly recovered after President Trump publicly refuted the claims as “false.”
Canadian Political Uncertainty Adds to the Equation
Adding to the market’s complexity is the announcement by Canadian Prime Minister Justin Trudeau that he intends to step down following a leadership election within the Liberal Party. This means the Canadian Parliament will be adjourned until late March, injecting further uncertainty into the Canadian economic and political landscape.
Technical Analysis: Upward Momentum for USD/CAD
Despite the volatility, the technical outlook for USD/CAD favors continued upside momentum. The pair appears to be establishing an uptrend, with the 1.42 level acting as a robust support. The recent rebound from the 1.4350 area further reinforces this bullish bias.
Long-Term Outlook and Trading Strategy
With the current technical setup and the ongoing Canadian political situation, the USD/CAD is likely to continue appreciating in the longer term. A potential target for the pair is the 1.45 level, which could be tested as early as this Friday when the US non-farm payrolls and Canadian employment data are released simultaneously.
Given this outlook, a “buy on the dip” strategy appears favorable for the USD/CAD pair. We anticipate that this bullish momentum will persist in the foreseeable future, particularly in light of the ongoing parliamentary disruption in Canada.
Key Takeaways:
- Volatility: The USD/CAD experienced significant intraday volatility due to a false report about US tariffs.
- Political Factors: Uncertainty surrounding the Canadian political leadership could negatively impact the Canadian Dollar.
- Technical Outlook: USD/CAD is exhibiting a clear uptrend with established support levels.
- Trading Strategy: The recommendation is to buy USD/CAD on pullbacks.
- Upcoming Catalyst: Friday’s jobs data releases in both the US and Canada could be key drivers for the pair.
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