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Published: 25 August 2026,06:53
Daily Market Analysis New
Key Takeaways:
*The Canadian dollar weakened sharply as U.S.-Canada trade negotiations collapsed, pushing USD/CAD back toward 1.385.
*50% U.S. tariffs on Canadian autos and parts and Canada’s planned dollar-for-dollar retaliation have increased concerns over exports, growth and inflation.
*Weak manufacturing data adds to pressure on the loonie, with July manufacturing sales falling 0.2%.
The Canadian dollar has come under renewed pressure after U.S.-Canada trade negotiations collapsed, with USD/CAD climbing back toward 1.385 after the pair had fallen toward 1.3757 on August 20. The reversal reflects a sharp deterioration in trade sentiment. Washington has escalated tariffs on Canadian imports and President Trump has threatened to raise tariffs on Canadian cars, trucks and auto parts to 50% from January 1, 2027, while Ottawa has promised dollar-for-dollar retaliation beginning September 8. The new measures increase the risk of weaker Canadian exports, higher import costs and slower economic growth.
The Canadian dollar is particularly vulnerable because Canada is a highly open economy with substantial exposure to U.S. trade. Markets are therefore beginning to price in the possibility that the trade dispute could have a more persistent impact on Canadian growth. Early Canadian manufacturing data also showed July manufacturing sales falling 0.2%, adding to concerns that the trade shock could be appearing alongside weaker domestic activity. A weaker loonie could help Canadian exporters remain competitive, but it also raises the domestic cost of imported goods and equipment, creating a difficult environment for the Bank of Canada.
Oil prices provide an important counterweight because higher crude prices normally support Canada’s commodity-exporting economy. However, that support may be insufficient if the trade dispute continues to deteriorate. The market is now watching whether Washington and Ottawa can reopen negotiations, whether exemptions are granted and how much fiscal support the Canadian government may provide to affected industries. USD/CAD around 1.40 has become an important psychological target: a sustained break above it would signal that the trade shock is becoming a more significant fundamental drag on the loonie, while a move back below 1.38 would suggest some of the tariff premium is fading.
Technical Analysis
USD/CAD is attempting to stabilize after finding support near the 1.3735 area, following an extended decline from the July highs. The pair recently staged a strong rebound from this support zone, with buyers pushing price back toward the key 1.3860 resistance level, suggesting that downside momentum has begun to ease.
Despite the recent recovery, the broader structure remains cautious as USD/CAD continues to trade below the major resistance levels at 1.3970 and 1.4105. The 1.3860 region now represents an important pivot point, with a sustained break above this level potentially signaling a deeper corrective rebound.
Momentum indicators have improved noticeably. RSI has recovered above the neutral 50 level, reflecting strengthening buying interest after the recent selloff. Meanwhile, MACD has produced a bullish crossover and moved back into positive territory, with an expanding histogram indicating that upside momentum is rebuilding.
Resistance Levels: 1.3860, 1.3970
Support Levels:1.3735, 1.3585
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