**USDCAD Analysis and Projections** USDCAD has hit its highest point in five weeks as trade talks between the US and Canada continue. These talks aim to change or replace parts of the USMCA, mainly due to a proposed 35% tariff from the US. For four straight days, USDCAD has been climbing, gaining 200 pips (+1.50%) since it hit a low last week. The pair went beyond the early July peak and the 50% retracement level, reaching a session high of 1.3780 before closing at 1.3765. If it stays above 1.3777, it could aim for the June high of 1.3797 and potentially the round figure of 1.3800. On the downside, support lies between 1.3749 and 1.3759, where it had previously been resistance. So far this year, USDCAD is down 4.33%, following a decline after an initial spike in 2024. The 100-day moving average at 1.3832 remains a key resistance level, although recent trading suggests potential stability. Canada ranks third among US import sources, with $437 billion worth of goods imported in 2024. It trails China at $536 billion and Mexico at $454 billion, making up about 13.5% of total US goods imports. **Trade Talks Imminence** With the August 1st deadline for US-Canada trade talks approaching, there is a clear risk of further Canadian dollar weakness. The chance of new tariffs has already driven USDCAD to a five-week high. We believe that the most likely path will be higher for this pair in the upcoming weeks. This political uncertainty adds to existing economic challenges. Recent figures from Statistics Canada revealed that the merchandise trade deficit unexpectedly expanded to C$1.9 billion in June. In contrast, the US manufacturing PMI from S&P Global for July was 52.1, indicating ongoing growth. Due to this increased uncertainty and the potential for significant changes, we believe buying USDCAD call options is a smart strategy. This lets us take advantage of possible gains if no agreement is reached while limiting our losses to the premium paid. We expect volatility to remain high until there is clarity on the trade situation. We are closely monitoring the 1.3800 level, as a breach above this psychological barrier would show strong bullish momentum. Our initial target for these option trades would be around the 1.3833 level, which corresponds with a critical technical resistance point. Historically, trade disputes have led to substantial spikes, such as the near 1.4800 peak in early 2024. The main risk to this outlook is an unexpected last-minute agreement, which could lead to a sharp decline in USDCAD. A sustained drop back below the 1.3750 mark would suggest that the upward trend is slowing. For now, we view the recent breakout above former resistance as a positive sign for ongoing gains. Create your live VT Markets account and start trading now.

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