Buying USD/CAD After the Retreat Ends at 1.40 Despite Higher Canada Earnings
USD/CAD Retreated 1.7 cents lower after the surge on Monday, but it has stalled at 1.40, where we decided to open a long position in this forex pair.
Canada Average Weekly Earnings YoY Increase Again
In the weeks following Donald Trump’s election in early November, the USD/CAD pair has experienced a strong bullish trend, propelled by both political developments and trade-related announcements. On Monday, Trump’s social media post outlining a proposed 25% tariff on Canadian imports further fueled the pair’s upward momentum, driving it roughly 7 cents higher over two months and breaking above the 1.40 level earlier this month. During periods of retracement, the 20 SMA (gray) consistently provided support, helping to sustain higher lows. The pair reached a peak of 1.4177 during today’s Asian session.
USD/CAD Chart H4 – 1.40 Is Holding As Support
On his first day in office, Trump announced a plan to impose a 10% tariff on Chinese goods and a 25% tariff on imports from Canada and Mexico. This announcement caused initial volatility in currency markets, weakening the Mexican peso and the Canadian dollar. As a result, the USD/CAD pair surged to a four-year high of 1.4177 before retracing to 1.40 amid a broader USD decline. However, market sentiment improved as US stock indices turned positive and equities recovered.
On the H4 chart, today’s slide in the pair found support at the 50 SMA (yellow), which helped halt the decline. The stochastic indicator also showed oversold conditions, signaling that the retracement might be complete and suggesting the potential for a bullish reversal. This technical setup prompted us to open a buy signal on USD/CAD, anticipating a continuation of the upward trend.
Canada Economic Data Highlights:
Q3 Current Account Balance:
- Came in at -3.2 billion CAD, significantly better than the expected -9.3 billion CAD.
- The prior reading was revised upward from -8.5 billion CAD to -4.7 billion CAD.
- This improvement reflects stronger-than-expected trade and income flows.
September Weekly Earnings (Year-over-Year):
- Rose 5.2%, surpassing the previous reading of 4.6%.
- The prior figure was revised higher to 4.9%, highlighting upward wage momentum.
- Sustained wage growth suggests tighter labor market conditions and persistent inflationary pressures.
Canada’s current account balance for Q3 showed a sharp improvement, narrowing to a deficit of -3.2 billion CAD, much better than forecasts of -9.3 billion CAD. Meanwhile, wage growth in September accelerated, with weekly earnings up 5.2% year-over-year, reflecting a tight labor market and increased inflation risks. These data points underscore Canada’s economic resilience, with the current account benefiting from robust trade and rising wages bolstering household income.
USD/CAD Live Chart
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