USD/CAD strengthens to approximately 1.3820 during the early European session on Monday. The United States has implemented a 50% tariff on goods imported from Canada. In response, Canadian Prime Minister Carney has pledged a ‘dollar-for-dollar’ retaliation, effective September 8. Iranian officials maintain a resolute stance, asserting that the sanctions will ultimately prove ineffective. During Monday’s early European session, the USD/CAD pair regains some of its lost ground to close at 1.3820. The Canadian Dollar weakens against the US Dollar after US-Canada talks collapse into a trade war. Source reported that Washington has implemented 50% tariffs on certain Canadian products following the collapse of trade talks between the two nations on Friday.
In response, Canadian Prime Minister Mark Carney announced that the country would implement its own retaliatory tariffs starting on September 8. Carney further stated that the government was “walking away from a bad deal,” and would now “match Washington’s new tariffs dollar for dollar.” Later on Friday, the annual Jackson Hole conference commences in Wyoming, with the new US Federal Reserve Chair Kevin Warsh set to deliver remarks. Traders will be attentive to indications from Warsh regarding its dedication to combating inflation. Any hawkish remarks from Fed officials could support the Greenback against the CAD in the near term. Conversely, escalating tensions in the Middle East may lead to an increase in crude oil prices, thereby bolstering the commodity-linked Loonie.
Iran’s Foreign Minister Abbas Araghchi characterised the anticipated new US sanctions as a manifestation of desperation on Sunday, asserting that these forthcoming measures would ultimately prove ineffective in undermining Tehran. It is important to recognise that Canada stands as a significant player in the oil export market, and elevated crude oil prices typically exert a favourable influence on the CAD. Analysts at Deutsche Bank observe that trade frictions have resurfaced as a significant theme, with “tariffs… back in the headlines over the weekend, after the trade talks between the US and Canada broke down.” The bank emphasises that the breakdown in negotiations has swiftly influenced market sentiment, amplifying worries regarding the direction of US‑Canada trade relations and contributing to the wider context of tariff uncertainty.
In the daily chart, USD/CAD exhibits a bearish near-term sentiment as it remains positioned below the 100-day Simple Moving Average and the middle band of the Bollinger Bands. Price is retreating toward the lower Bollinger band support, while the Relative Strength Index (14) around 34 hovers in oversold territory, indicating that downside pressure persists but that the sell-off could be losing some momentum. On the topside, initial resistance is observed at the 100-day simple moving average at 1.3915, followed by the middle band of the Bollinger bands near 1.3940. The upper Bollinger band at 1.4135 serves as a more significant barrier should a rebound continue. On the downside, immediate support is identified at the lower Bollinger band near 1.3745, and a sustained breach below this level would pave the way for additional declines, maintaining the pair’s bearish orientation.
