The USD/CAD pair edged higher during Monday’s Asian session, holding around the 1.3690 mark, as renewed trade tensions pressured the Canadian Dollar (CAD). Despite upbeat Canadian employment figures, investor sentiment soured following fresh tariff threats from the U.S. administration under former President Donald Trump.
Tariff Fears Drag on the Loonie
The Canadian Dollar came under pressure after Trump announced a sweeping 30% tariff on imports from the European Union and Mexico, set to take effect on August 1. In addition, he reiterated plans for a 35% tariff on Canadian goods, escalating an already tense trade environment. These measures are layered on top of existing 50% tariffs on Canadian steel and aluminum, with Canada being the largest supplier of both to the United States.
Mounting trade barriers pose a significant downside risk to Canada’s export-driven economy, particularly for key industrial sectors, thereby denting CAD strength in the near term.
Canadian Employment Beats Expectations
However, stronger-than-expected Canadian jobs data helped cushion the blow. According to Statistics Canada, the unemployment rate dropped to 6.9% in June, down from 7.0% in May and better than the 7.1% forecast. The economy added a stunning 83,100 jobs last month, far exceeding expectations for a flat reading.
This robust labor market performance dampens the odds of a Bank of Canada (BoC) interest rate cut at its next meeting. According to LSEG Data & Analytics, the probability of a 25 basis point rate cut at the BoC’s July policy decision has now fallen to just 13%, down sharply following Friday’s data.
Upcoming Data in Focus: Canadian CPI
Looking ahead, traders will closely watch Canada’s June CPI inflation report, due Tuesday, for further policy clues. If inflation prints stronger than expected, it could reinforce market expectations that the BoC will maintain its current policy stance, potentially lending support to the Canadian Dollar.
USD/CAD Technical Overview
- Resistance: Initial resistance lies at the 1.3700 level, followed by 1.3735, a key pivot zone. A break above may open the door to 1.3800.
- Support: On the downside, support is seen at 1.3650, followed by the 1.3600 handle and the 50-day EMA near 1.3575.
- Momentum: RSI remains neutral around 50, suggesting a wait-and-see mood among traders ahead of key inflation data.
Conclusion
USD/CAD remains range-bound near 1.3700, with bullish pressure fueled by escalating tariff fears. However, strong Canadian employment data has capped the Greenback’s gains for now. The next directional catalyst for the pair could come from Canada’s CPI figures and further developments in U.S.-Canada trade tensions.
Stay Updated with Daily Forex Pakistan.