On trade matters, Canadian Prime Minister Mark Carney has made it clear that Canada will not make concessions to the United States regarding the review of the USMCA, nor will it accept rules unilaterally set by the US. He emphasised that the agreement’s periodic review should be based on negotiation, rather than one party exerting pressure whilst the other passively accepts. The review, originally scheduled to be completed by 1 July, has become strained due to the US’s previous imposition of tariffs on key Canadian imports. Carney believes that these tariff measures have, in fact, prompted Canada to accelerate its efforts to reduce dependence on the US market and to diversify its trade arrangements. The US, however, has expressed dissatisfaction with the agreement, arguing that the current arrangements are not fair enough to the United States. The US Trade Representative has indicated that if Canada does not participate in negotiations to expand the ‘rules of origin’, the US may resort to other border measures to safeguard its own interests. Whilst formal negotiations have yet to commence, the US has already sought further concessions, whilst Mexico has engaged in multiple rounds of discussions with the US and made relatively faster progress. Despite the clear differences, the Canadian side has stated that there has been communication at multiple levels and does not believe that a failure to reach agreement in the short term necessarily implies the collapse of the agreement.

Discussions on monetary policy within the United States are equally fraught with uncertainty. Kevin Warsh, the nominee for Federal Reserve Chair, emphasised during his Senate confirmation hearing that he had never promised President Trump a rate cut and would uphold the independence of monetary policy. Whilst he refrained from commenting on the administration’s investigation into the current Federal Reserve Chair, Jerome Powell, and other moves that might be perceived as political interference, he made it clear that the Federal Reserve must focus on controlling inflation and fulfilling its statutory duties. Warsh advocates for more substantial reforms to the Federal Reserve, arguing that the high inflation following the pandemic stems in part from policy errors. He suggests utilising artificial intelligence and big data to improve inflation measurement methods, whilst reducing reliance on forward guidance. He also advocates for allowing more open dissent within the Federal Reserve to enhance the transparency of policy discussions. Although the overall outlook for his nomination is considered optimistic, procedural disputes within the Senate could still delay the confirmation process.

Looking at the USD/CAD on the four-hour chart, the Bollinger Bands are narrowing, the moving averages are flattening, and the price is fluctuating around the 12-period EMA. The short-term downtrend is likely to reverse. The MACD fast and slow lines have formed a ‘kiss’, indicating that downward momentum is weakening and a rebound could occur at any moment. Resistance lies near the upper Bollinger Band and the 50-period EMA, at 1.37 and 1.372 respectively. The RSI stands at 45, indicating that market pessimism has eased somewhat. On the daily chart, the Bollinger Bands are narrowing and the moving averages are flattening out; the price has reached the support level of the trend line in the short term, making a rebound highly likely. The RSI stands at 39, suggesting that market sentiment remains predominantly pessimistic. The recommended strategy is to buy on dips.

Trading Direction: Buy

Entry Price: 1.366

Target Price: 1.41

Stop-loss: 1.35

Support Levels: 1.35, 1.325, 1.28

Resistance Levels: 1.4, 1.41, 1.42