US China Trade Discussions

Upcoming trade discussions between the US and China are anticipated in Switzerland. The Bank of Canada report warns of trade war risks and potential credit defaults affecting the Canadian economy.

USD/CAD experiences a sharp rise after breaking out from a Falling Wedge pattern. The pair rises above the 20-period EMA at 1.3860, suggesting a shift to a bullish trend.

The RSI climbs to near 66.00, indicating strong bullish momentum. The pair may target levels at 1.4075 and 1.4272 if it surpasses 1.4000.

The US Dollar is widely circulated and accounts for over 88% of global foreign exchange turnover. The Federal Reserve’s monetary policy and interest rate adjustments significantly affect its value.

Quantitative easing can lead to a weaker US Dollar, while quantitative tightening typically strengthens it.

Broader Dollar View

Given the context, it’s clear that we’re dealing with a market shift supported by firm signals from central banks and developing trade narratives. The US Dollar has recently benefited from a lack of dovish sentiment at the Federal Reserve. Powell hasn’t indicated any haste to introduce lower rates, which calls for an adjustment in positioning from those who have been pricing in early policy loosening. Instead, the stability in forward guidance continues to lend the Greenback a steady bid, particularly after the 1% rally observed across two days.

The move in USD/CAD now rests above the 1.3860 region, which is not just a marker for the 20-period EMA but also a level that was previously acting as resistance within a larger consolidation structure. When we spot a formation such as a Falling Wedge, particularly near support zones, a bullish breakout tends to attract decent flow. That was proven again, with the breakout holding now near 1.3920. The pattern completion brings into view a higher continuation range, and technicals support that notion—with the Relative Strength Index climbing close to 66, we’re moving further into momentum territory. Keep an eye on behaviour around 1.4000. It’s not just psychological resistance but also a test of market intent. If flows sustain, targets toward 1.4075 and 1.4272 could be realised in relatively shorter order.

The story’s not just about domestic influences. Cross-border elements are emerging too. We note that Canada, on the other side of the pair, is carrying worries via its central bank—with deeper focus given to credit stress and possible trade-related disturbances in the near term. These concerns, flagged openly in their latest outlook, place additional downward pressure on the Loonie. And that may well support positioning bias toward further strength in this pair.

Meanwhile, the broader Dollar view demands attention. DXY has eased from its recent peak but holds most of the rebound, and the move higher was driven not only by Powell’s commitment to patience but also headlines related to a new trade framework between Washington and London. These sorts of political agreements are not just symbolic; they reinforce confidence in current account flows and attract institutional support—rarely immediate, but with visible effects in the medium term.

Now, talks between the US and China are reportedly scheduled in Switzerland. While these discussions remain preliminary, any reference to tariff rollbacks or a framework for easing trade tensions could disturb current pair trends. The Canadian central bank has already painted a cautious picture regarding the effects of prolonged trade friction. This introduces an element of asymmetry: until clarity emerges, the Canadian side remains reactive rather than assertive. That dynamic keeps widening the policy gap between the Bank of Canada and the Fed.

Historically, the Federal Reserve’s actions have projected influence far beyond domestic bond markets. With around 88% of global FX transactions involving the Dollar, it’s not difficult to see why subtle shifts in tone or data dependencies spark large-scale rebalancing. Whether easing or tightening policy, the effects manifest visibly not just in rates but also in cross rates like USD/CAD. Recent months have leaned toward policy stasis—yet the path forward will be shaped increasingly by inflation prints and employment metrics, rather than political will.

As for balance sheet operations, any mention of adjustments—like a fresh round of asset sales or slowing reinvestments—tends to bolster the Dollar. Quantitative tightening, when sufficiently persistent, reduces liquidity in the system and underpins value through scarcity. Individuals trading this pair should remember that the implications extend into yield curves and cross-currency demand.

From our angle, watching for sustained bullish structure on the daily and four-hour charts helps in framing expectations around entries and risk placements. We look for directional commitment near key technical barriers, especially if backed by macro data or fresh policy cues. Volume confirmation will also be telling over the coming sessions, especially as sentiment begins to price in conclusions from the US-China sessions or additional central bank missives.

The current setup remains structurally favourable, but quick pivots are always possible should surprise headlines impact core forecasts.

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