- USD/CAD rebounds following a robust recovery in the US Dollar.
- Weak US flash S&P Global PMI data for February fails to dampen investor sentiment.
- Caution grows around the Canadian Dollar (CAD) as President Trump considers a 25% tariff on Canada.
The USD/CAD pair rebounds to around 1.4220 during European trading hours on Monday, recovering from an earlier dip to near 1.4180. The Loonie pair recovers as the US Dollar (USD) almost fully recovers its losses, with the US Dollar Index (DXY) bouncing back to approximately 106.60.
The USD Index gains momentum as investors absorb the weak US flash S&P Global Services PMI data for February, which revealed an unexpected contraction in the services sector for the first time in 25 months.
Meanwhile, concerns over a potential 25% tariff on Canada by US President Donald Trump persist. Trump had delayed his decision to impose the tariffs by one month on February 4, after Canada and Mexico agreed to cooperate on criminal enforcement at borders.
On the monetary policy front, Bank of Canada (BoC) Governor Tiff Macklem warned in a speech on Friday in Ontario that the economic impact would be severe if Trump proceeds with tariffs on all imports from Canada.
The USD/CAD is currently forming a Descending Triangle pattern on the hourly chart. The upper downward-sloping trendline is drawn from the February 9 high of 1.4380, while the flat lower trendline is placed from the February 14 low of 1.4151.
The 20-period Exponential Moving Average (EMA) is aligning with the Loonie price, suggesting a sideways movement.
The 14-period Relative Strength Index (RSI) is trading within the 40.00-60.00 range, signaling indecisiveness among investors.
The pair has been in a downtrend since the start of February and could see further downside if it breaks below the February 14 low of 1.4151, targeting the December 9 low of 1.4094, followed by the December 6 low of 1.4020.
On the other hand, a move above the February 19 high of 1.4246 would open the door to resistance near the 1.4300 level and the February 9 high of 1.4380.
USD/CAD Hourly Chart
