The USD/CAD pair held firm around the 1.4500 psychological level during Tuesday’s Asian session, hovering close to the one-month high reached on Monday. The US Dollar (USD) gained ground amid mounting fears that President Donald Trump’s newly imposed tariffs could reignite inflation, potentially prompting the Federal Reserve (Fed) to maintain higher interest rates for an extended period.
Trade Tensions and Oil Prices Weigh on Canadian Dollar
Concerns over an escalating US-Canada trade war added pressure on the Canadian Dollar (Loonie), particularly after the White House confirmed that reciprocal tariffs could take effect on April 2. The commodity-linked Loonie also faced headwinds from bearish Crude Oil prices, further boosting the USD/CAD pair.
Canada has threatened to impose 25% retaliatory tariffs on US imports if Washington proceeds with its new duties. The uncertainty surrounding trade relations between the two nations continues to fuel demand for the Greenback.
Technical Outlook Favors Bulls
From a technical perspective, the USD/CAD pair rebounded from the vicinity of the 50-day Simple Moving Average (SMA), breaking past the 50% Fibonacci retracement level of its recent decline from February’s multi-year peak. Daily chart oscillators remain in positive territory without signaling overbought conditions, indicating the likelihood of further upside momentum.
A sustained move higher could lead to a retest of the 1.4545 resistance level, aligned with the 61.8% Fibonacci retracement. Continued buying pressure may push the pair toward the 1.4600 mark, with further gains potentially targeting the 1.4665-1.4670 region before challenging the 1.4700 barrier — the highest level since April 2003, recorded on February 3.
Downside Risks Remain Limited
On the downside, initial support lies near the 1.4470 level, with dip-buying expected around the 1.4400 handle or the 38.2% Fibonacci retracement. A break below this zone could expose the 1.4360-1.4350 region, reinforced by the 50-day SMA. Deeper losses might shift the bias toward bearish traders, opening the door for a decline toward the 1.4300 level and the 1.4240-1.4235 zone before testing the 1.4200 mark. Further downside could lead to the mid-1.4100s, representing the year-to-date low reached last month.
Market participants now await key US labor market data, including Wednesday’s ADP employment report and Friday’s Nonfarm Payrolls, which could influence the Fed’s interest rate outlook and impact the USD/CAD trajectory.
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