- USD/CAD kicks off the new week on a subdued note amid a mixed fundamental backdrop.
- Rising US-Canada trade tensions and a modest USD uptick lend some support to the major.
- Bets for more Fed rate cuts in 2025 act as a headwind for the buck and the currency pair.
The USD/CAD pair struggles to capitalize on Friday's modest gains and oscillates in a narrow band, just above mid-1.4300s on the first day of a new week. The Canadian Dollar (CAD) is undermined by the risk of a further escalation of the US-Canada trade war and rather unimpressive Canadian employment details released on Friday. That said, the underlying bearish sentiment surrounding the US Dollar (USD) is holding back traders from placing aggressive bullish bets and acting as a headwind for the currency pair.
US President Donald Trump took another pivot on his tariff agenda and said that impending tariffs on Canada may or may not come on Monday, or on Tuesday. This comes immediately after the Trump administration temporarily waived off tariffs on goods from Canada and Mexico that comply with the US–Mexico–Canada Agreement for a month. Furthermore, US Commerce Secretary Howard Lutnick said late Sunday that the 25% tariffs on steel and aluminum imports, set to take effect on Wednesday, are unlikely to be postponed.
Meanwhile, Mark Carney, who is expected to be sworn in as the Canadian Prime Minister in the coming days, attacked Trump in much of his victory speech and vowed to win the trade war. This fuels concerns about the potential economic fallout from rising trade tensions, which was evident from the latest Canadian jobs data. In fact, Statistics Canada reported that the economy added a net of 1,100 jobs in February, down sharply from 76,000 last month. This reflected the early potential impact of uncertainty over US tariffs on corporate hiring decisions.
From the US, the headline Nonfarm Payrolls (NFP) print showed that the economy added 151K new jobs last month compared to the 160K expected and the previous month's downwardly revised reading of 125K. Additional details of the report showed that the Unemployment Rate unexpectedly edged higher to 4.1% from 4.0% in January. This pointed to a slowdown in the US labor market, reaffirming market bets for further policy easing by the Federal Reserve (Fed) and overshadowing a rise in the Average Hourly Earnings to 4% from 3.9% in the previous month.
This, along with worries that Trump's protectionist policies will hit economic activity in the world’s largest economy, holds back the USD bulls from placing aggressive bets and acts as a headwind for the USD/CAD pair. Furthermore, an intraday uptick in Crude Oil prices seems to underpin the commodity-linked Loonie and contributes to capping the currency pair. There isn't any relevant market-moving economic data due for release on Monday, either from the US or Canada, leading spot prices at the mercy of the USD and Oil price dynamics.
USD/CAD daily chart
Technical Outlook
From a technical perspective, last week's bounce from the 1.4240-1.4235 region and the subsequent move up on Friday, along with positive oscillators on the daily chart, favor bullish traders. That said, it will still be prudent to wait for sustained strength and acceptance above the 1.4400 mark before positioning for additional gains. The USD/CAD pair might then surpass Friday's swing high, around the 1.4425 region, and climb to the 1.4480 hurdle en route to the 1.4500 psychological mark. The momentum could extend further towards the 1.4545 area, or the monthly swing high touched last Tuesday.
On the flip side, the 1.4355-1.4345 zone now seems to protect the immediate downside ahead of the 1.4360 mark. A convincing break below could make the USD/CAD pair vulnerable to accelerate the fall towards the 1.4300 round figure en route to the 1.4255 intermediate support and the 1.4200 round figure. The latter now coincides with the 100-day Simple Moving Average (SMA) and should now act as a key pivotal point, which if broken decisively might shift the near-term bias in favor of bearish traders.
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