USDCAD correction begins as investors take profits

The USDCAD currency pair renewed its monthly high yesterday, rising above the 1.454 level. However, Tuesday ended with massive buying of the Canadian dollar against the U.S. currency, and the rate fell to the middle of the range, where it was in December and January. Probably, the bulls decided to fix the profit of the last 2 weeks. This provoked the beginning of USDCAD correction, and within this movement the next target will be 1.431.

The reason for closing short positions on the Canadian dollar was the introduction of tariffs on the import of goods to the United States. In his speech, Canadian Prime Minister Justin Trudeau called this decision of Donald Trump stupid and announced immediate countermeasures. As of today, tariffs will be imposed on more than 20 billion dollars worth of American products, and in 3 weeks, another 87 billion dollars will be added.

Canadian Finance Minister Dominic LeBlanc told the country's provincial leaders that an initial package of support measures is being prepared to soften the impact of the U.S. tariffs on people and businesses. He said domestic trade barriers will be lowered, as well as restrictions on labor mobility. This will support the Canadian economy, while American companies may suffer no less.

According to experts at Deutsche Bank AG, the U.S. dollar may lose its traditional status as a safe-haven currency. The bank's strategists cite the speed and scale of global changes, as well as growing uncertainty in the United States itself. Trade tensions are rising, while GDP growth is slowing. Against this backdrop, more and more investors are predicting a Fed rate cut in the coming months and a weaker dollar.

The Stochastic indicator has reversed from the overbought zone, giving a sell signal for the USDCAD pair. The next target for the bears is the 1.431 level.

Consider the following trading strategy:

Selling USDCAD at the current price. Take profit - 1.431. Stop loss - 1.448.