Currency markets opened on Monday with the US dollar under pressure, as traders assessed weekend developments related to US tariff policy. According to Reuters:
→ On Friday, the Supreme Court ruled that President Trump’s sweeping tariffs exceeded his authority.
→ In response, the US president criticised the court and introduced a blanket 15% import levy. Trump also insisted that higher-tariff agreements with trade partners should remain in force.
Against this backdrop, USD/CAD slipped below the 1.3660 level today. This comes despite the upward move observed since 11 February (marked by purple lines), which developed after Canadian inflation slowed from 2.7% to 2.4%. The weaker inflation data weighed on the Canadian dollar, as markets began pricing in the possibility of future interest rate cuts by the Bank of Canada.
When analysing USD/CAD on 29 January (with the market trading near the psychological 1.3500 level), we:
→ highlighted the presence of a long-term descending channel;
→ noted that price was close to its lower boundary, which could act as support;
→ considered a rebound scenario.
Since then, USD/CAD has formed two bullish reversals near the 1.3500 area. However, on both occasions bullish momentum appeared to fade around 1.3700.
The current price action resembles a rounding top pattern, suggesting that sellers may soon attempt to regain control and push towards the lower purple boundary in an effort to resume the broader long-term downtrend.
