The Canadian Dollar (CAD) is staying steady against the US Dollar (USD) despite trade pressures from the US. The USD/CAD pair is nearing 1.3700, facing resistance after the US announced a 50% tariff on copper, signaling possible further restrictions on Canadian exports. Canada relies heavily on the US for trade, which exposes it to risks from geopolitical tensions. According to the UN COMTRADE database, in 2024, Canadian exports to the US amounted to $435 billion, making up about 76% of Canada’s total exports. To address these concerns, Canadian Foreign Minister Anita Anand is working on trade diversification and a free-trade agreement with ASEAN nations. Despite the tensions, the CAD remains stable, supported by strong energy prices and high global demand for commodities. The USD/CAD is approaching resistance at the 78.6% Fibonacci retracement level at 1.3713. If it breaks above this, the next target could be the June high at 1.3823. However, if it fails to stay above 1.3700, it may test the June low around 1.3540.

Impact of Tariffs

Tariffs are taxes imposed on imports to protect local industries by making foreign products more expensive. While they can safeguard domestic businesses, they also risk escalating trade disputes. US President Donald Trump intends to keep tariffs in place to bolster the economy, with a focus on trade relationships with Mexico, China, and Canada. In summary, the Canadian Dollar (CAD) is maintaining its value against the US Dollar (USD) despite a significant 50% tariff on copper from the US. This situation is a warning sign for potential wider trade restrictions affecting Canadian exports. To break it down: USD/CAD is currently close to 1.3700, an important technical level. This is crucial because markets often react strongly at key price points. The 1.3713 level also corresponds to the 78.6% Fibonacci retracement level, marking a significant point for traders. If USD/CAD breaks through this, it might head toward the next target at the June high of 1.3823. However, if it fails to remain above 1.3700, we may see a drop back toward the lower end, potentially around 1.3540, which corresponds to this year’s June low. Additionally, Canada exports over three-quarters of its goods to the US—$435 billion in 2024, as per UN COMTRADE data. This highlights Canada’s dependence and vulnerability to changes in US policy. Tariffs, especially on copper, may affect more than just metal prices.

Trade Diversification Efforts

In response to these risks, Anand is pursuing stronger ties with ASEAN nations. This strategy aims to reduce Canada’s reliance on the US market. While it’s uncertain how quickly this will earn results, it shows proactive planning. For now, strong energy prices are helping support the CAD. With stable oil prices and high demand for commodities, the loonie is holding steady despite tariff threats. However, relying solely on this support is risky, especially as other central banks reconsider their rate strategies. The rise of protectionism has changed market dynamics as tariffs impact trade flows. From a strategic viewpoint, volatility around USD/CAD varies greatly. The higher levels bear more risk if tariff talks escalate, while lower levels require steady support from energy markets and international relations to assist the CAD. Trump’s consistent approach aims to support domestic production through tariff adjustments. His administration has taken definitive stances with China, Mexico, and now more recently, Canada. This indicates that the trade direction isn’t a temporary shift but a deliberate policy choice. Thus, pauses or breakdowns at these critical technical levels aren’t coincidental; they signal the tension between fiscal policy changes and the strength of a currency backed by commodities. Create your live VT Markets account and start trading now.

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