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USD/CAD dips toward 1.3800 amid broad US Dollar weakness.
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Speculation grows as President Trump considers removing Fed Chair Powell over rate stance.
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Canadian Prime Minister Carney promises tax cuts and increased defense spending.
The USD/CAD pair slumped to the 1.3800 level in Monday’s European session, marking its lowest point in six months. The decline follows a sharp drop in the US Dollar (USD), which is under pressure as speculation mounts over President Donald Trump’s potential move to dismiss Federal Reserve Chair Jerome Powell for not cutting interest rates. The US Dollar Index (DXY) has plunged to a three-year low near 98.00, amplifying bearish sentiment.
Market confidence in the USD continues to erode due to Trump’s unpredictable tariff rhetoric and wavering stance on economic policies, which have added uncertainty to the global outlook. However, some optimism lingers as US Commerce Secretary Howard Lutnick expressed confidence in a forthcoming US-China trade agreement.
In Canada, Prime Minister Mark Carney announced plans for tax cuts and increased defense spending, aimed at reducing the country’s economic reliance on the US. These policy measures are expected to boost domestic growth, further supporting the Canadian Dollar.
Technically, USD/CAD is testing a critical support zone near the ascending trendline drawn from the May 2021 low of 1.2031. The 20-week Exponential Moving Average (EMA) is trending lower near 1.4140, indicating weakening momentum. Additionally, the 14-week Relative Strength Index (RSI) has dropped below 40.00 for the first time in nearly four years, suggesting potential for further downside if bearish momentum sustains.
A decisive break below 1.3600 could open the door for further declines toward the psychological 1.3500 level and the September 24 low at 1.3430. Conversely, a recovery above 1.4000 could trigger a rebound toward the April 9 low at 1.4075 and possibly the April 8 low at 1.4272.
USD/CAD weekly chart
