USD/CAD price nears 1.405 as U.S. tariff threat and Fed policies fuel dollar strength
The Loonie continues to retreat amid Trump's aggressive rhetoric.
The Loonie continues to retreat amid Trump's aggressive rhetoric.
On Wednesday, November 27, the U.S. dollar sought to consolidate gains from the previous day, closing at 1.416, its highest level since late May 2020.
This movement was driven by news of a ceasefire between Israel and Lebanon and Donald Trump’s statement about a potential 25% import tariff on goods from Canada and Mexico, which currently benefit from NAFTA's free trade agreements.
Both the Middle East peace settlement and the proposed tariffs weaken Canadian shale oil's position in the US market, undermining the Canadian dollar. However, traders are capitalizing on the Loonie’s extremely low price, which has allowed it to hold steady around 1.405, with minimal weakening compared to Tuesday's close.
Price dynamics USD/CAD in October-November 2024. Source: TradingView.
Meanwhile, the aggressive trade policies of the new US administration toward its neighbors, combined with a less dovish Federal Reserve stance, favor a bullish trend for the USD/CAD pair.
Down, down, down?
In this context, the US dollar's upward trajectory points toward revisiting the spring 2020 highs, when USD reached 1.46 CAD. Conversely, any further declines could be seen as buying opportunities, likely remaining limited near the psychological level of 1.400.
The U.S. dollar’s rise against the Canadian dollar to 1.4178 resistance attracted selling interest, causing the pair to decline to 1.4055 support. Breaking below it would lead to a decline toward 1.4020-1.4000, while holding above 1.4055 would allow the USD to test resistance at 1.4090-1.4100.
