The USDCAD pair has bounced upward from the 1.356 support level for the second time in a month. The previous rally extended to a mid-term downtrend line, which then pushed prices lower again. This time, the technical setup looks similar, but fundamentally, the US dollar’s strength against the Canadian dollar appears more justified. A breakout above the trendline could quickly drive the pair to 1.375.
As expected, the issue of Donald Trump's import tariffs is back in the spotlight. The US government has released a list of 14 countries whose tariffs will increase by up to 40% starting August 1. Although Canada is not on this list, its economy could still suffer from 50% tariffs on copper. Canada is a major producer and supplier of copper to the US, and Prime Minister Mark Carney has less and less time until July 21 to reach a trade deal.
Meanwhile, Canadian authorities have already started preparing for potential economic challenges. According to Reuters sources, the country's finance ministry recently asked all other government departments to cut spending. Budget cuts of 7.5% are planned for the 2026–2027 fiscal year, with savings targets rising to 10% and 15% in the following years.
Against this backdrop, Bank of America analysts predict that USDCAD will shift to an upward trend. They believe the US dollar will strengthen against most major currencies in the near term. The Canadian dollar could be particularly vulnerable due to a weakening labor market, which has been declining for four straight months. Bank of America experts anticipate that Canada’s June jobs report, due Friday, will show a decline in employment, which could put strong downward pressure on the Canadian dollar.
The Stochastic indicator on the USDCAD daily chart has given a buy signal, increasing the chances of a downtrend reversal. The nearest target for bulls could be the 1.375 level.
Consider the following trading strategy:
Buy USDCAD at the current price. Take profit — 1.375. Stop loss — 1.356.
This content is for informational purposes only and is not intended to be investing advice.
