The Canadian Dollar is maintaining stability against the US Dollar amid trade pressures from the US. USD/CAD is approaching 1.3700, with key resistance after the US announced a 50% tariff on Copper, hinting at more restrictions on Canadian exports.
Canada’s dependency on the US for trade highlights the risks of geopolitical tensions. The UN COMTRADE database shows that in 2024, $435 billion of Canadian exports went to the US, making up about 76% of Canada’s total exports. Canadian Foreign Minister Anita Anand is focusing on trade diversification and a free-trade deal with ASEAN.
Despite tensions, the CAD remains stable due to strong energy prices and global demand for hard assets. USD/CAD’s price action is nearing resistance near the 78.6% Fibonacci retracement at 1.3713, and a break above could target the June high at 1.3823. Failure to hold above 1.3700 may lead to testing the June low near 1.3540.
Impact Of Tariffs
Tariffs are customs duties designed to protect local industries by giving them a price edge over imports. Tariffs could shield domestic industries or risk escalating trade wars. US President Donald Trump plans to maintain tariffs to support the economy, notably focusing on trade with Mexico, China, and Canada.
Given the context, what we are observing is a Canadian Dollar (CAD) that has, for the most part, managed to hold its ground against the US Dollar (USD), even though Washington has moved forward with a steep 50% tariff on copper. This development is hardly isolated; it’s more of an early warning shot that could lead to broader trade restrictions targeting Canadian exports.
To break this down a bit—USD/CAD is hovering just under 1.3700, a level that carries considerable weight from a technical standpoint. Why does that matter? Because markets tend to respond more clearly when prices converge at such prior turning points. Here, 1.3713 also marks the 78.6% Fibonacci retracement level, traced from a previous downward move. In market terms, this area can act as a lid, often resulting in failed breakouts or, if breached, a sharp continuation. That continuation could push USD/CAD toward the next clear upside marker, the June high near 1.3823.
However, if buyers fumble and the price can’t sustain itself above that 1.3700 threshold, then we must prepare for a retracement back toward the downside. In that case, setting sights near 1.3540 is grounded in reason, as it’s tied to this year’s low in June—another region markets have respected.
Now, stepping slightly away from price action for a moment, the broader trade dynamic deserves attention. Canada sends more than three-quarters of its goods to the United States—$435 billion worth in 2024, according to the UN’s COMTRADE data. That figure doesn’t just underline dependence; it highlights the exposure to policy shifts south of the border. So when tariffs are introduced—especially in sectors like copper—the impact has the potential to extend far beyond metals.
Trade Diversification Efforts
Anand’s response to these risks has been practical but ambitious. Her efforts to negotiate deeper ties with ASEAN nations reflect a strategy to reduce heavy exposure to US demand. Whether that comes to fruition fast enough is uncertain, but at least directionally, it reflects forward-planning.
Energy has helped fortify the CAD, at least for now. With oil prices stable and global appetite for commodity-linked currencies holding up, the loonie hasn’t collapsed under the weight of tariff threats. However, counting on that support alone—especially in a risk-sensitive climate with other central banks rethinking their next rate move—is improper if positioning derivative exposures.
There’s also the wider context of protectionism. As tariffs become more than just line items on trade agreements, they alter market flows. From a strategy perspective, we contend that volatility around USD/CAD remains asymmetric. The upper levels invite more risk if the tariff narrative deepens, while the lower bands need energy markets and cross-border diplomacy to keep lending support to the CAD.
Trump’s course is consistent—back domestic production by adjusting prices through duties. His administration has drawn firm lines with China, Mexico, and now more tangibly, Canada. What that tells us is simple: this isn’t just a brief detour in the trade direction. It’s a declared policy stance.
Accordingly, breakdowns or pauses near these technical levels aren’t random. They reflect the tension between a fiscal policy shift and the resilience of a commodity-backed currency.
