USDCAD stabilizes after Trump and Trudeau's dialogue

USDCAD quotes rose significantly on February 3 amid expectations of Donald Trump's tariffs on goods from Canada. However, later the exchange rate declined sharply, accompanied by a high daily volatility of 3%. Quotes reached the maximum of 1.47908, but then fell to 1.43875. On Tuesday, the decline continued and by Wednesday morning the opening price was 1.43132.

The reason for this change in quotations was the news that Trump signed a decree to apply duties on goods from Canada, which was to come into force on February 4. This caused panic in the markets and investors started to actively buy the dollar as a safe asset. However, after negotiations between Trump and Canada's Prime Minister Justin Trudeau, the US decided to delay the tariffs for thirty days to try to strike a final economic agreement. Abolition of duties weakened the dollar, which caused USDCAD quotes to decline.

USDCAD is consolidating now. Market participants perceived Trump's threats to impose tariffs as a negotiating tool rather than a real aim. The USDCAD exchange rate remains inactive near the 1.43000 level after a sharp rebound. This indicates a temporary lull in the market.

The nearest important event that can affect the USDCAD rate will be the publication of data on the trade balance of the USA and Canada. Canada expects the indicator to rise, given that it is an energy importer of the U.S., especially in the face of a cold January. At the same time, the US forecasts an increase in the trade deficit. If the real data does not coincide with the forecasts, it may significantly affect the exchange rate. If one focuses on the forecast figures, the quotations may decline after the data publication. 

From the point of view of technical analysis, on February 3, there was a pullback and the market experienced a correction. MACD indicator shows the weakening of the bullish impulse, but the bearish trend has not formed yet. The RSI indicator points out that the quotes were close to the overbought zone, but did not reach it. Now the market has stabilized and there is no trend. Macroeconomic indicators remain neutral. USDCAD is likely to enter the phase of sideways consolidation.

Current Recommendation:

Sell USDCAD at the current price. Take profit — 1.42600. A Stop-loss — 1.45922.