Throughout the European session on Monday, the USD/CAD currency pair tumbled to around 1.3800. This decrease brings it to its lowest level in the past half year. Right now, the US Dollar is in its worst weakness. This drop can be attributed to a combination of factors including trade tensions, national political uncertainty, and a general change in investor market sentiment. Relatedly, the US Dollar Index (DXY) has suffered a spectacular crash. It currently sits at a three-year low just under 98.00, which is the value of the dollar relative to six major currencies.
While these markets are controversial, the fall in the USD/CAD pair has been notable. It raises broader alarm about the state of the US economy and effects of President Donald Trump’s continued, unsupported tariff policies. Canada’s new prime minister Mark Carney has promised to deliver tax cuts and boost spending on defense. He intends to assist Canada in weaning the country off the US, given the current tempestuous trade environment.
Technical Indicators Signal Weak Trend
Recent technical analysis has featured some alarming trends for the USD/CAD pair. The 14-week RSI has dropped under the 40.00 mark. This is the first month since November 2019, a very important development indicating a deep weakening in momentum for the US Dollar. The 20-week Exponential Moving Average (EMA) has begun to turn down around the 1.4140 area. This movement is a clear signal of a bearish trend for the currency pair.
Market analysts note that the USD/CAD is cfition right now at an important crossroads. The pair’s approaching a longer-term upward-sloping trendline in the area of 1.3800. This trendline is drawn off the high of 1.2031 set in May of 2021, as seen on a weekly chart. A break below this level could lead to further declines, with analysts eyeing potential support levels at 1.3600 and the psychological barrier of 1.3500, which could pave the way towards the September 24 low of 1.3430.
Political Turbulence Affects Market Confidence
There are a number of political and economic factors at play that are making the US Dollar seem weaker by the day. This downturn is leaving everyone anxious — investor, market — about the future. President Trump’s inconsistent, contradictory statements regarding tariff policies have raised questions. This doubt puts the credibility of the US Dollar as the safe haven asset into question. From here, market participants are getting more and more jittery. This change is particularly striking in light of Trump’s recent threat to fire Federal Reserve Chair Jerome Powell for being reluctant to lower interest rates.
Concerns grew among investors with recent developments. Some of them are even concerned about the Federal Reserve’s independence and its ability to effectively respond to future economic crises. The Greenback is still under pressure. This context could impact the USD/CAD pair as traders adjust their positions in light of these uncertainties.
Domestic issues are tough enough. To make matters worse, dread over a looming recession due to the US-Sino trade war has only compounded things. In either case, recent optimism from Washington about the status of a potential US-China trade deal has been encouraging. Yet, many are unconvinced about how it would strengthen the dollar in the long term.
Canadian Response to Economic Challenges
In the wake of those pressures, Canadian Prime Minister Mark Carney is making some audacious plans. He has alone announced tax cuts and increased defense spending to fortify Canada’s economic resilience. Carney’s administration wants to reduce Canada’s reliance on the US economy given the long-running tariff war and current market uncertainty.
We’re proud that these initiatives are central to building a stronger Canadian economy. Collectively, they have the potential to stabilize unsustainable growth and improve investor confidence. Analysts see a bearish sentiment hanging over USD/CAD as the US Dollar continues to lack strength. Canada’s early steps could set it up for years of stability against the U.S. dollar.
International markets are reacting violently to political news and economic data. As a result, the USD and CAD are keeping traders on their toes. Stay tuned to this changing dynamic. Equally important should be a watchful eye as it plays out, with economic correction and reorientation toward new policies likely.