Canadian Dollar Forecast: USD/CAD - Trump, Trudeau, Tiff and Tariffs

Article By:

, Sr. Strategist

Today 8:30 PM

Canadian Dollar, USD/CAD Talking Points:

The U.S. Dollar set a fresh two-year-high this week but notably, USD/CAD has held inside of the lower-high from last week. Bulls have so far shied away from a test of the 1.4500 level in USD/CAD.
For next week the big item around the USD is the CPI release on Wednesday, but for USD/CAD perhaps more pressing is commentary around possible tariffs from the United States, which Tiff Macklem of the BoC called a ‘major uncertainty’ at the December rate cut.
The Canadian Dollar matched its strongest daily outing against the U.S. Dollar in more than a year this week on Monday when news indicated that Justin Trudeau was resigning the Prime Minister post.

With a move such as we’ve seen in USD/CAD, where the pair drove to fresh four-year-highs and finished a year above 1.4000 for the first time in more than two decades, there’s often multiple drivers at work. And to be sure, that certainly seems to be the case here, as a strong U.S. Dollar in Q4 went along with the introduction of possible tariffs on Canadian exports to the United States, which helped to prod that break above the big figure.

But as we wade deeper into 2025 trade the big question now is what can bring more bulls to the table as the pair remains quite elevated on a longer-term, bigger picture basis. And perhaps more to the point is the question as to whether tariffs on Canada something that Trump truly wants to follow-through with, as energy is a major export from Canada to the U.S. and tariffs could simply stoke inflation in the United States, which would make execution of Trump’s economic agenda seemingly more complicated.

Trump has wielded the power of social media in negotiations in the past and given the acrimony between himself and Prime Minister Justin Trudeau, with the President-elect recently referring to Trudeau as a ‘governor’ of the ‘51^st state’ in the U.S., it would make sense that at least some of what we’ve seen could be chalked up to social media dynamics.

It has been visible in price action, however, so it would be remiss to dismiss the threat or possibility out of hand. The initial social media remark on the matter, when Trump initially suggested potential 25% tariffs on Mexico and Canada should the borders not be shored up for the spread of migrants and drugs, USD/CAD prices spiked up to a fresh four-year-high.

While buyers did pullback from the bid a bit, they didn’t leave entirely, and that was around the time that support began to show at the 1.4000 psychological level. In December, buyers continually pushed fresh highs with a major move pricing in around the FOMC rate decision on the 18^th and a follow-through high the day after.

Since then, however, highs have held inside of that level at 1.4467.

USD/CAD Daily Price Chart

Chart prepared by James Stanley, USD/CAD on Tradingview

U.S. Dollar Strength, USD/CAD Range

For the past nine-plus years, USD/CAD has been in a range. The high over that period is at 1.4690 and was established in 2015. In 2020 amidst the pricing-in of the covid pandemic, price made a fast run at that high but fell 22 pips shy of that level, with 1.4668 setting the 2020 high.

These were also the only two instances of price over the 1.4000 level in the past decade-plus.

At this point bulls remain in-control of the short-term move as we’ve seen since late-November, following the support hold at the 1.4000 level. But that longer-term resistance looms overhead and if we do see mean reversion in the U.S. Dollar, then range continuation in USD/CAD can be an attractive prospect.

But the question should be asked, what fundamental variable would need to show to allow for range continuation in the pair and, in-turn, mean reversion in the U.S. Dollar? Given the response to this morning’s Non-farm Payrolls print with markets further pricing out FOMC rate cuts, I think the answer for that drives back to inflation data, and next Wednesday brings a big data point with the release of Consumer Price Index data for the month of December.

At this point, I’m still considering this a market that bulls retain control of, even with the shorter-term instance of lower-highs looked at earlier. The underside wick on the currently weekly bar further illustrates that and this puts focus on the 1.4500 level and 1.4668-1.4690 zone.

USD/CAD Weekly Price Chart

Chart prepared by James Stanley, USD/CAD on Tradingview

--- written by James Stanley, Senior Strategist

Canadian Dollar, USD/CAD Talking Points:

The U.S. Dollar set a fresh two-year-high this week but notably, USD/CAD has held inside of the lower-high from last week. Bulls have so far shied away from a test of the 1.4500 level in USD/CAD.
For next week the big item around the USD is the CPI release on Wednesday, but for USD/CAD perhaps more pressing is commentary around possible tariffs from the United States, which Tiff Macklem of the BoC called a ‘major uncertainty’ at the December rate cut.
The Canadian Dollar matched its strongest daily outing against the U.S. Dollar in more than a year this week on Monday when news indicated that Justin Trudeau was resigning the Prime Minister post.

Indices AD

With a move such as we’ve seen in USD/CAD, where the pair drove to fresh four-year-highs and finished a year above 1.4000 for the first time in more than two decades, there’s often multiple drivers at work. And to be sure, that certainly seems to be the case here, as a strong U.S. Dollar in Q4 went along with the introduction of possible tariffs on Canadian exports to the United States, which helped to prod that break above the big figure.

But as we wade deeper into 2025 trade the big question now is what can bring more bulls to the table as the pair remains quite elevated on a longer-term, bigger picture basis. And perhaps more to the point is the question as to whether tariffs on Canada something that Trump truly wants to follow-through with, as energy is a major export from Canada to the U.S. and tariffs could simply stoke inflation in the United States, which would make execution of Trump’s economic agenda seemingly more complicated.

Trump has wielded the power of social media in negotiations in the past and given the acrimony between himself and Prime Minister Justin Trudeau, with the President-elect recently referring to Trudeau as a ‘governor’ of the ‘51^st state’ in the U.S., it would make sense that at least some of what we’ve seen could be chalked up to social media dynamics.

It has been visible in price action, however, so it would be remiss to dismiss the threat or possibility out of hand. The initial social media remark on the matter, when Trump initially suggested potential 25% tariffs on Mexico and Canada should the borders not be shored up for the spread of migrants and drugs, USD/CAD prices spiked up to a fresh four-year-high.

While buyers did pullback from the bid a bit, they didn’t leave entirely, and that was around the time that support began to show at the 1.4000 psychological level. In December, buyers continually pushed fresh highs with a major move pricing in around the FOMC rate decision on the 18^th and a follow-through high the day after.

Since then, however, highs have held inside of that level at 1.4467.

USD/CAD Daily Price Chart

Chart prepared by James Stanley, USD/CAD on Tradingview

U.S. Dollar Strength, USD/CAD Range

For the past nine-plus years, USD/CAD has been in a range. The high over that period is at 1.4690 and was established in 2015. In 2020 amidst the pricing-in of the covid pandemic, price made a fast run at that high but fell 22 pips shy of that level, with 1.4668 setting the 2020 high.

These were also the only two instances of price over the 1.4000 level in the past decade-plus.

At this point bulls remain in-control of the short-term move as we’ve seen since late-November, following the support hold at the 1.4000 level. But that longer-term resistance looms overhead and if we do see mean reversion in the U.S. Dollar, then range continuation in USD/CAD can be an attractive prospect.

But the question should be asked, what fundamental variable would need to show to allow for range continuation in the pair and, in-turn, mean reversion in the U.S. Dollar? Given the response to this morning’s Non-farm Payrolls print with markets further pricing out FOMC rate cuts, I think the answer for that drives back to inflation data, and next Wednesday brings a big data point with the release of Consumer Price Index data for the month of December.

At this point, I’m still considering this a market that bulls retain control of, even with the shorter-term instance of lower-highs looked at earlier. The underside wick on the currently weekly bar further illustrates that and this puts focus on the 1.4500 level and 1.4668-1.4690 zone.

USD/CAD Weekly Price Chart

Chart prepared by James Stanley, USD/CAD on Tradingview

--- written by James Stanley, Senior Strategist

Canadian Dollar, USD/CAD Talking Points:

The U.S. Dollar set a fresh two-year-high this week but notably, USD/CAD has held inside of the lower-high from last week. Bulls have so far shied away from a test of the 1.4500 level in USD/CAD.
For next week the big item around the USD is the CPI release on Wednesday, but for USD/CAD perhaps more pressing is commentary around possible tariffs from the United States, which Tiff Macklem of the BoC called a ‘major uncertainty’ at the December rate cut.
The Canadian Dollar matched its strongest daily outing against the U.S. Dollar in more than a year this week on Monday when news indicated that Justin Trudeau was resigning the Prime Minister post.

Indices AD

With a move such as we’ve seen in USD/CAD, where the pair drove to fresh four-year-highs and finished a year above 1.4000 for the first time in more than two decades, there’s often multiple drivers at work. And to be sure, that certainly seems to be the case here, as a strong U.S. Dollar in Q4 went along with the introduction of possible tariffs on Canadian exports to the United States, which helped to prod that break above the big figure.

But as we wade deeper into 2025 trade the big question now is what can bring more bulls to the table as the pair remains quite elevated on a longer-term, bigger picture basis. And perhaps more to the point is the question as to whether tariffs on Canada something that Trump truly wants to follow-through with, as energy is a major export from Canada to the U.S. and tariffs could simply stoke inflation in the United States, which would make execution of Trump’s economic agenda seemingly more complicated.

Trump has wielded the power of social media in negotiations in the past and given the acrimony between himself and Prime Minister Justin Trudeau, with the President-elect recently referring to Trudeau as a ‘governor’ of the ‘51^st state’ in the U.S., it would make sense that at least some of what we’ve seen could be chalked up to social media dynamics.

It has been visible in price action, however, so it would be remiss to dismiss the threat or possibility out of hand. The initial social media remark on the matter, when Trump initially suggested potential 25% tariffs on Mexico and Canada should the borders not be shored up for the spread of migrants and drugs, USD/CAD prices spiked up to a fresh four-year-high.

While buyers did pullback from the bid a bit, they didn’t leave entirely, and that was around the time that support began to show at the 1.4000 psychological level. In December, buyers continually pushed fresh highs with a major move pricing in around the FOMC rate decision on the 18^th and a follow-through high the day after.

Since then, however, highs have held inside of that level at 1.4467.

USD/CAD Daily Price Chart

Chart prepared by James Stanley, USD/CAD on Tradingview

U.S. Dollar Strength, USD/CAD Range

For the past nine-plus years, USD/CAD has been in a range. The high over that period is at 1.4690 and was established in 2015. In 2020 amidst the pricing-in of the covid pandemic, price made a fast run at that high but fell 22 pips shy of that level, with 1.4668 setting the 2020 high.

These were also the only two instances of price over the 1.4000 level in the past decade-plus.

At this point bulls remain in-control of the short-term move as we’ve seen since late-November, following the support hold at the 1.4000 level. But that longer-term resistance looms overhead and if we do see mean reversion in the U.S. Dollar, then range continuation in USD/CAD can be an attractive prospect.

But the question should be asked, what fundamental variable would need to show to allow for range continuation in the pair and, in-turn, mean reversion in the U.S. Dollar? Given the response to this morning’s Non-farm Payrolls print with markets further pricing out FOMC rate cuts, I think the answer for that drives back to inflation data, and next Wednesday brings a big data point with the release of Consumer Price Index data for the month of December.

At this point, I’m still considering this a market that bulls retain control of, even with the shorter-term instance of lower-highs looked at earlier. The underside wick on the currently weekly bar further illustrates that and this puts focus on the 1.4500 level and 1.4668-1.4690 zone.

USD/CAD Weekly Price Chart

Chart prepared by James Stanley, USD/CAD on Tradingview

--- written by James Stanley, Senior Strategist

Canadian Dollar, USD/CAD Talking Points:

The U.S. Dollar set a fresh two-year-high this week but notably, USD/CAD has held inside of the lower-high from last week. Bulls have so far shied away from a test of the 1.4500 level in USD/CAD.
For next week the big item around the USD is the CPI release on Wednesday, but for USD/CAD perhaps more pressing is commentary around possible tariffs from the United States, which Tiff Macklem of the BoC called a ‘major uncertainty’ at the December rate cut.
The Canadian Dollar matched its strongest daily outing against the U.S. Dollar in more than a year this week on Monday when news indicated that Justin Trudeau was resigning the Prime Minister post.

Indices AD

With a move such as we’ve seen in USD/CAD, where the pair drove to fresh four-year-highs and finished a year above 1.4000 for the first time in more than two decades, there’s often multiple drivers at work. And to be sure, that certainly seems to be the case here, as a strong U.S. Dollar in Q4 went along with the introduction of possible tariffs on Canadian exports to the United States, which helped to prod that break above the big figure.

But as we wade deeper into 2025 trade the big question now is what can bring more bulls to the table as the pair remains quite elevated on a longer-term, bigger picture basis. And perhaps more to the point is the question as to whether tariffs on Canada something that Trump truly wants to follow-through with, as energy is a major export from Canada to the U.S. and tariffs could simply stoke inflation in the United States, which would make execution of Trump’s economic agenda seemingly more complicated.

Trump has wielded the power of social media in negotiations in the past and given the acrimony between himself and Prime Minister Justin Trudeau, with the President-elect recently referring to Trudeau as a ‘governor’ of the ‘51^st state’ in the U.S., it would make sense that at least some of what we’ve seen could be chalked up to social media dynamics.

It has been visible in price action, however, so it would be remiss to dismiss the threat or possibility out of hand. The initial social media remark on the matter, when Trump initially suggested potential 25% tariffs on Mexico and Canada should the borders not be shored up for the spread of migrants and drugs, USD/CAD prices spiked up to a fresh four-year-high.

While buyers did pullback from the bid a bit, they didn’t leave entirely, and that was around the time that support began to show at the 1.4000 psychological level. In December, buyers continually pushed fresh highs with a major move pricing in around the FOMC rate decision on the 18^th and a follow-through high the day after.

Since then, however, highs have held inside of that level at 1.4467.

USD/CAD Daily Price Chart

Chart prepared by James Stanley, USD/CAD on Tradingview

U.S. Dollar Strength, USD/CAD Range

For the past nine-plus years, USD/CAD has been in a range. The high over that period is at 1.4690 and was established in 2015. In 2020 amidst the pricing-in of the covid pandemic, price made a fast run at that high but fell 22 pips shy of that level, with 1.4668 setting the 2020 high.

These were also the only two instances of price over the 1.4000 level in the past decade-plus.

At this point bulls remain in-control of the short-term move as we’ve seen since late-November, following the support hold at the 1.4000 level. But that longer-term resistance looms overhead and if we do see mean reversion in the U.S. Dollar, then range continuation in USD/CAD can be an attractive prospect.

But the question should be asked, what fundamental variable would need to show to allow for range continuation in the pair and, in-turn, mean reversion in the U.S. Dollar? Given the response to this morning’s Non-farm Payrolls print with markets further pricing out FOMC rate cuts, I think the answer for that drives back to inflation data, and next Wednesday brings a big data point with the release of Consumer Price Index data for the month of December.

At this point, I’m still considering this a market that bulls retain control of, even with the shorter-term instance of lower-highs looked at earlier. The underside wick on the currently weekly bar further illustrates that and this puts focus on the 1.4500 level and 1.4668-1.4690 zone.

USD/CAD Weekly Price Chart

Chart prepared by James Stanley, USD/CAD on Tradingview

--- written by James Stanley, Senior Strategist