forexeatrading 
- USD/CAD lifted by Trump’s tariff push however faces resistance overhead
- US information lacking forecasts on the quickest tempo in 5 months
- Fed price lower bets develop, pushing Treasury yields to 2025 lows
- Bond futures sign decrease yields, reinforcing bearish USD/CAD dangers
- Key ranges: Watching 50DMA for potential quick setups
Abstract
The Canadian dollar has been on the again foot towards its US counterpart since President Donald Trump reaffirmed earlier this week that proposed 25% tariffs on Canadian imports stay on monitor for early March implementation. Nonetheless, how a lot additional USD/CAD can push larger is questionable given its robust long-term correlation with US 10-year Treasury yields.
The broader atmosphere isn’t precisely supportive of the US dollar proper now. US financial information is rolling over, the federal government is in austerity mode, Treasury provide stays purposely restricted, and Scott Bessent has made it clear that reducing benchmark charges is a key precedence for the Trump administration to ease borrowing prices for households and companies. Add in an unfavorable technical backdrop for bond bears and USD/CAD’s proximity to a well-defined resistance zone, and a possible quick setup is rising.
Financial Divergence Evident
US financial information is now undershooting market expectations on the quickest tempo in additional than 5 months, as mirrored in Citigroup’s financial shock index under. A studying under zero—seen within the blue shading—signifies extra information is lacking to the draw back than exceeding forecasts. Whereas this doesn’t recommend financial exercise is collapsing, simply underperforming relative to expectations, it stands in stark distinction to Canada, the place information is stunning to the upside on the strongest price since July final yr.
Supply: Refinitiv
Tariffs or not, that’s hardly a macro sign that screams purchase USD/CAD, particularly with Canada pledging to retaliate if the US strikes forward with the measures.
US Bond Bulls Operating Exhausting
Mounted-income markets are attuned to weaker US information. Futures now mirror expectations for greater than two full 25bp price cuts from the Fed in 2025—essentially the most since mid-December—whereas the US 2s10s curve is now the flattest in almost three months. That implies progress and inflation expectations are being pulled again at a fast tempo.
Supply: TradingView
US 10-year Treasury yields have additionally fallen to their lowest degree of 2025. That’s vital for USD/CAD given the pair has maintained a 0.92 correlation coefficient with benchmark yields over the previous six months.
Draw back Dangers for Yields, USD/CAD?
From a technical perspective, US 10-year Treasury be aware futures—used to gauge directional dangers for yields as a consequence of their inverse relationship with bond costs—recommend draw back dangers to each could also be rising.
Supply: TradingView
Benchmark bond futures have surged into the contract roll on heavy quantity, reclaiming a key uptrend that beforehand acted as robust shopping for assist earlier than breaking down in late December.
Whereas some could argue that the value is forming a rising wedge—suggesting contemporary shorts are positioning for a resumption of the bearish development—I’m unconvinced after this week’s bullish worth motion. RSI (14) and MACD are flashing bullish momentum alerts, and with fundamentals favouring bond bulls, the trail of least resistance seems to be larger. Which means decrease yields.
USD/CAD: Bearish Bias Favoured
Whereas falling yields would sometimes assist USD/CAD exterior of utmost risk-off intervals, there’s no rush to quick simply but. Nonetheless, if the pair pushes just a little larger, it is going to method its 50-day shifting common—a degree it struggled to interrupt earlier this month.
Supply: TradingView
A brief commerce might be established on the 50-day shifting common, with a cease above 1.4372 for cover. The primary draw back goal can be 1.4270, adopted by 1.4150. A break of the latter may open the door to additional declines in direction of 1.4100 and even 1.3932.
RSI (14) has turned larger, and MACD has crossed over from under, signaling momentum is shifting bullish. Once more, that reinforces the necessity for persistence earlier than getting into quick positions.
Elevated Occasion Threat
Past tariff headlines—that are arguably near being priced in given Trump has already adopted via on an analogous risk with China—there are vital occasion dangers over the subsequent three periods that would set off significant market volatility.
Supply: TradingView
Nvidia’s (NASDAQ:NVDA) earnings report after the shut is a key one, given the hype surrounding AI shares. A miss would seemingly drive threat aversion, supporting the US greenback.
US GDP may additionally gasoline financial considerations if it undershoots expectations, whereas Friday’s PCE report shall be carefully watched—not only for the Fed’s most well-liked inflation measure but additionally for client earnings and spending information.
Weak point there would sometimes assist quick USD/CAD positions.
