USD Surges as Trump’s Tariffs Bite—EUR, CNH Slide, CAD Slumps to New Lows

EUR/USD turns bearish, testing 1.0200, break below targets parity
USD/CAD hits 22-year highs; momentum indicators support further gains
USD/CNH faces key resistance at 7.3750; watch for possible breakout
Chinese policy response to tariffs remains uncertain amid Lunar New Year holidays

Summary

Donald Trump has delivered on his campaign promises, signing executive orders over the weekend to impose 25% tariffs on Canadian and Mexican imports and a smaller 10% hike on goods from China. After months of speculation over the scope, speed, and targets of his trade policies, Trump himself has proven to be the most reliable guide to what has materialized.

Unsurprisingly, the Canadian dollar, Mexican peso, and Chinese yuan tumbled against the US dollar following the announcement. The move raises economic risks for these nations, increasing the likelihood of fiscal and monetary support, while also cushioning the tariff impact by making their currencies more competitive against a surging US dollar.

The euro has also plunged alongside the CAD, MXN, and CNH, with Trump making it clear that European imports are next in line. Given the EU’s annual goods trade surplus of around $200 billion with the US—including $20.5 billion in November alone—retaliatory action could be just as severe.

With the macroeconomic environment skewed firmly bearish, the following analysis examines the technical picture for USD/CAD, USD/CNH, and EUR/USD, highlighting key levels traders should watch when positioning for potential bounces or breaks.

EUR/USD Bears Eye 2025 Low

Source: TradingView

The technical picture for EUR/USD turned decisively bearish ahead of the tariff headlines over the weekend, with the price dropping back through the 50DMA before breaking the uptrend established at the January 2025 swing low. RSI (14) mirrored the price action, breaking its uptrend, with MACD confirming the bearish signal.

It’s no surprise EUR/USD tanked in early Monday trade, sliding toward 1.0200—a key level both bears and bulls will be watching closely this week.

A clean break of the January lows may lead to a retest of 1.0095, a minor level established in late 2022. Beyond that, parity looms as an obvious target, with little beneath it until 0.9633 and 0.9536, the latter being the record low set in September 2022.

If a reversal occurs from these levels, 1.0345 has acted as both support and resistance around the calendar turn, making it an initial level of note. Further resistance may be encountered at 1.0461 and 1.0544.

USD/CAD at 22-Year Highs

Source: TradingView

USD/CAD surged to fresh 22-year highs as trade resumed on Monday, easily clearing the March 2020 and January 2016 highs. With few nearby technical levels now the break has occurred, near-term focus shifts to price action. RSI (14) is trending higher, and MACD has crossed over from below, confirming the bullish price signal. This strengthens the case for the breakout to extend.

Alternatively, if the price reverses and holds beneath the March 2020 high, the former cyclical peak of 1.4595 would be in focus. Beyond, there is limited visible support until 1.4270, with only the 50DMA in between.

USD/CNH: Make-or-Break Week

Source: TradingView

USD/CNH is testing an important technical level, with Monday’s rally stalling at the intersection of the September 2023 high of 7.3680 and an uptrend dating back to the September 2024 swing low. The next topside level to watch is 7.3750, the September 2022 swing high, which also marks the record low for the offshore-traded yuan.

Recently, Chinese policymakers have pushed back against market forces during acute periods of yuan weakness, setting the starting point for onshore trade stronger than implied by closing levels. State-backed banks have been instructed to sell US dollars in the open market, and bill auctions have drained yuan liquidity, making it costly to short the CNH. So far, these measures have been effective. But will China continue to support the yuan with the Trump Administration making Chinese exports to the US 10% more expensive?

The timing of Trump's executive orders further clouds the picture, arriving during Lunar New Year holidays. Trade in mainland Chinese markets won’t resume until Wednesday, meaning we may not see the full policy response until then. This makes price action in the coming days even more important.

Should the September 2022 highs give way, there are few technical levels to speak of, placing greater emphasis on price action. Momentum indicators like RSI (14) and MACD are firmly bullish, increasing the likelihood of a breakout.

If we see a reversal from this key technical zone, downside levels of note include 7.3330, 7.3000, the 50DMA, and 7.2400.

-- Written by David Scutt

Follow David on Twitter @scutty

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