The USDCAD pair has experienced considerable volatility and has remained within a range since December. Recent reports indicate that Canada and Mexico may have their fentanyl tariffs lifted, which could affect the pair.
Following news from CNBC, USDCAD saw a decline but has stabilised in light of statements from senior officials about addressing trade actions. Additionally, reports suggest Canada may avoid countertariffs that could impact jobs and prices.
Market Sentiment And Cad Outlook
As the announcement approaches, speculation continues, with the CAD likely to increase substantially if positive news emerges.
This article outlines recent movements in the USD/CAD currency pair, with the Canadian dollar reacting to developments around potential changes in trade policy, particularly related to fentanyl tariffs. The pair has seen wide fluctuations but remained generally rangebound since December, meaning that although the price has moved up and down, it has not broken meaningfully above or below established support or resistance levels. With mounting speculation over a resolution to the trade matter, market participants are beginning to anticipate a shift in conditions, with attention now focused on how the Canadian dollar might respond.
The decline in the pair following CNBC’s coverage reflected uncertainty being priced in. Once it became known that Canadian trade responses might be softened—especially avoiding direct countermeasures that would raise costs or threaten employment—that helped reduce the downside pressure. Instead of a broader risk-off reaction, what we saw was a brief pullback, stabilised by clear communication from senior officials who aimed to dampen fears of a protracted trade dispute. Commentators interpreted those updates as calibrated moves to protect economic sentiment without committing either side to firm concessions.
For those of us monitoring this pair, it’s apparent that certain thresholds are now in sharper focus. Should there be confirmation that relevant tariffs are scrapped or adjusted favourably for Canada, there’s an expectation that CAD could gain ground quickly. This isn’t abstract—the market has already priced in part of that optimism, and yet a decisive statement could spur a more forceful repricing. That sort of sudden directional momentum is what volatility traders tend to prepare for.
Factors Influencing Short Term Price Action
We need to be discerning here. Historically, these kinds of developments have led to immediate price adjustments that often follow through into medium-term trends. Not because tariffs directly alter the currency’s value overnight, but because they affect capital flows and investor confidence with some immediacy. If Canada’s position is finalised without harsh penalties, buyers of the currency might step in aggressively, especially if that development coincides with existing expectations for Bank of Canada policy to tighten relative to the US.
There is, of course, a timing aspect. While the remarks from trade representatives seem heavily choreographed to avoid escalation, markets do not wait for full clarity. Instead, narrative shaping already influences price expectations before anything formal is implemented or signed. That means, over the next couple of weeks, we may see technical levels challenged—especially previous highs tested during January and February.
Any upside in CAD would likely depend on the specifics of forthcoming statements. Should language around lifting restrictions be tethered to broad conditions or political compromises, the dollar might regain strength as the water becomes murkier. In contrast, unqualified tariff removal directed solely at Canada could trigger strong moves toward recent support zones, with increased positioning on the short side of USD/CAD.
What that tells us is we should maintain a bias towards opportunistic setups. Where volatility compression begins to reverse, it tends to do so impulsively. At such points, we don’t need to rely on distant central bank commentary—the price itself reflects risk-on or risk-off flows. This moment is primed for those focusing on directional trades within narrow windows but closely watching the macro backdrop. The immediate weeks ahead could offer unusually clean read-throughs from political signals into market movements. It might not stay that way for long.
