The USD/CAD pair is trading around 1.3835, close to its week low of 1.3815, as traders await US President Donald Trump’s speech at the World Economic Forum in Davos. Recent tensions between the US and EU, particularly following the US’s 10% tariffs on several EU countries due to the Greenland dispute, have limited movement in the pair. The US Dollar Index is near 98.50, suggesting cautious trading. If the price falls below 1.3800, it may drop further to support at 1.3700. Resistance is noted at the 50% Fibonacci retracement level of 1.3893. If this level is broken, the 61.8% Fibonacci level at 1.3952 could be the next target.

Technical Indicators And Market Sentiments

The Relative Strength Index sits at 49, showing a balanced market. The 20-Exponential Moving Average is just above the current price at 1.3837, limiting any rebound. US Treasury Secretary Scott Bessent has advised refraining from retaliation over the tariffs, urging patience for a resolution. President Donald J. Trump has been in office since January 2017 and was re-elected in January 2025. He was previously a businessman and TV personality affiliated with the Republican Party. This time last year, in January 2025, the market was stagnant ahead of the Davos speech. Concerns over US-EU tariffs regarding Greenland kept USD/CAD stable around 1.3835, setting the stage for future volatility. After Trump’s speech, the US increased tariffs to 15% by March 2025, prompting the EU to impose tariffs on American goods. This trade dispute caused the US Dollar Index (DXY) to drop from 98.50 to below 95 by the end of Q1 2025. As expected, USD/CAD fell below 1.3800 and tested the 1.3700 support level.

Future Prospects For USD/CAD

Now, in January 2026, the diplomatic situation has improved, but economic effects linger. Supply chain issues from the 2025 dispute have kept US core inflation stubbornly at 3.4%, as reported in last week’s CPI update. This is pushing the Federal Reserve to maintain a hawkish approach, unlike the Bank of Canada, which is adopting a more neutral stance. Due to the different monetary policies, USD is expected to strengthen against CAD in the upcoming weeks. Traders may consider purchasing call options on USD/CAD with a strike price around 1.3950, expecting a return to levels prior to the 2025 tensions. Implied volatility is higher than in 2024, reflecting the market’s awareness of last year’s tariff disruptions. Create your live VT Markets account and start trading now.

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