The US Dollar (USD) continued its broader bearish trend against the Canadian Dollar (CAD), with the USD/CAD pair falling below 1.3880 after being rejected at the 1.3900 level. Bears are now targeting the 1.3850 support zone, which coincides with the 200-day Simple Moving Average (SMA) and the bottom of the descending channel, while further downside could see the pair test the late May lows near 1.3770 [1].
This movement comes after the US and Canada reached a last-minute deal earlier on Wednesday to delay the imposition of new 50% tariffs on a wide range of Canadian goods for three days, as negotiations toward a trade agreement continue [1][2]. According to Michael Pfister at Commerzbank, the US President postponed the tariffs by three days because an agreement is reportedly close and more time is needed to finalize it [2].
Despite the announcement, the Canadian Dollar's reaction was described as 'fairly muted,' with market participants remaining uncertain about the durability and final form of the deal [2]. Commerzbank notes that for the CAD to recover more strongly, the new agreement must be robust and not quickly called into question, especially given the slow pace of Canada's domestic economic rebound [2].
Meanwhile, higher oil prices, a key Canadian export, have provided additional support for the CAD. Brent Oil has appreciated by more than 6% over the last three days, returning to the $90.00 area, which could signal higher trade revenues for Canada [1]. The daily Relative Strength Index (RSI) for USD/CAD hovers near 32, just above oversold levels, and the MACD is well below zero, indicating solid downside pressure [1].
The Canadian Dollar was the strongest against the Australian Dollar today, with a 0.38% gain, and showed a 0.17% gain against the US Dollar [1]. However, analysts caution that unless the trade agreement proves durable, the CAD's recovery may remain limited [2].
CONCLUSION
The delay of new US tariffs on Canadian goods has provided only modest relief for the Canadian Dollar, as uncertainty persists over the finalization and durability of the trade agreement. While higher oil prices and technical factors support the CAD, analysts warn that a more robust recovery will depend on the stability of the new deal and improvements in Canada's domestic economy.