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Support Zone Could Be the Launchpad for a Renewed Uptrend
Economic
Political
Summary:
If this bounce holds, it could pave the way for a continued rally toward the next resistance zone around 1.3884.
Buy
PENDINGUSDCAD
EXP
1.36500
Entry Price
1.38840
TP
1.35200
SL
1.36857 +0.00327 +0.24%
--
Point
PENDING
1.35200
SL
CLOSING
1.36500
Entry Price
1.38840
TP
Tensions between the U.S. and Canada escalated after President Trump issued a formal letter to Ottawa announcing the implementation of a 35% tariff on Canadian imports, effective August 1. As has become customary, the move was justified by citing the alleged influx of fentanyl into the U.S. from Canadian territory. Currency analyst Michael Pfister from Commerzbank noted that Canada’s prior retaliatory response to previous tariffs may have further provoked the current escalation—something Trump has historically shown little tolerance for.
Canadian Prime Minister Mark Carney responded by emphasizing continued diplomatic engagement with the U.S. as both nations approach the looming August 1 deadline. While the Canadian dollar (CAD) has managed to stabilize in the near term, the renewed tariff threat has added tension to an already delicate backdrop—particularly ahead of Canada's closely watched labor market data due today.
Meanwhile, political speculation is swirling in Washington. Bill Pulte, Trump’s nominee to head the Federal Housing Finance Agency and former chairman of Fannie Mae and Freddie Mac, referenced unverified reports suggesting that Federal Reserve Chair Jerome Powell might be considering stepping down. In a public statement, Pulte said, “I’m encouraged by reports that Jerome Powell is contemplating resignation. I believe this would be the right move for America, and the economy would thrive as a result.”
Pulte, a staunch Trump ally, has repeatedly voiced his belief that the U.S. president should have direct control over Federal Reserve interest rate decisions—a view that has stirred concerns over the Fed’s independence. It is worth noting that the rumors regarding Powell's resignation remain unconfirmed and speculative at this stage.
Minutes from the Fed’s June 17–18 policy meeting reaffirmed the central bank’s cautious stance, with the majority of officials still concerned about upward inflation risks, particularly those stemming from Trump’s aggressive tariff agenda. While only a few members of the Federal Open Market Committee (FOMC) backed the idea of a rate cut in July, the overall hawkish tone helped the U.S. dollar remain strong, near a two-week high as of Thursday.
On the macroeconomic front, fresh data from the U.S. Department of Labor showed that initial jobless claims fell to 227,000 for the week ending July 5, beating market expectations and dropping below the previous revised figure of 232,000. This, combined with the stronger-than-expected nonfarm payrolls data released last week, reinforces the resilience of the U.S. labor market and suggests that immediate rate cuts are unlikely.
San Francisco Fed President Mary Daly also weighed in, noting that current monetary policy remains restrictive. While she acknowledged that tariffs are not as impactful as previously feared, she indicated that the Fed could begin considering rate adjustments should underlying fundamentals point toward a softening economic outlook.
Technical Analysis
USDCAD has found firm support near the 1.3589 level—an area that has previously served as a reliable springboard for bullish momentum. The pair recently posted a strong close above the 9-period moving average, a development that may signal a shift in short-term trend dynamics. If this bounce holds, it could pave the way for a continued rally toward the next resistance zone around 1.3884.
Further supporting the bullish case, the Relative Strength Index (RSI) dipped to 27 on June 13, coinciding with the local low of 1.3545. Since then, no new lower lows have been made, hinting at the possibility of a bottom forming in this region. With price stability returning and technical indicators pointing toward recovery, the conditions may be aligning for an extended bullish move from current levels.
Trading Recommendations
Trading direction: Buy
Entry price: 1.3650
Target price: 1.3884
Stop loss: 1.3520
Validity: Jul 22, 2025 15:00:00
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