Confusion arose regarding the roll-back of US tariffs, with Treasury Secretary Scott Bessent incorrectly stating that the 10% tariff applied to Canada and Mexico. Despite this, the CAD has remained resilient amidst market volatility and weaker commodity prices.
Currently, the CAD’s equilibrium estimate is at 1.4128, while the USD faces potential support in the 1.40/1.41 range. A weekly close under 1.4107 could indicate further downward pressure on the USD.
Usd Bearish Trend
The USD is showing a bearish trend on charts, with risks of retesting last week’s low of 1.4025/30 and possibly reaching 1.3945. The 200-day moving average is at 1.4005.
We’ve seen some unexpected turbulence stem from confusion over tariff policy, with Bessent misstating the scope of the rollback. His comments referring to Canada and Mexico rattled sentiment briefly, though they were factually off the mark. Despite that minor misstep, the Canadian dollar hasn’t flinched much. It’s largely held its ground, even with pressure from falling commodity prices, which often tend to weigh more heavily on it.
Currently, price action in the USD/CAD pair leans towards the downside. The equilibrium rate at 1.4128 places the loonie right about where it “should” be based on model estimates, but there’s lean in the short-term bias to test lower ground. If price settles for the week below 1.4107, we’re looking at an open door to a continuation of this weakening. That close would dent momentum even further, and wouldn’t surprise us given the pattern we’re seeing in the indicators.
From a technical perspective, there isn’t much near-term support until the 1.4025 to 1.4030 region—those were the lows seen just a few sessions back. Momentum traders are watching carefully here. A fall through that door would leave prices vulnerable to testing 1.3945, aligning closely with historical congestion seen last autumn.
Price Discipline And Risk Thresholds
That said, the longer-term moving average hovers right near 1.4005. It’s not just a technical curiosity—it’s acted as a sponge for price moves in past cycles, and its proximity to current levels makes that zone especially watchable. We’re paying closer attention to how the pair behaves as it inches towards that reference point.
In the weeks ahead, price discipline and risk thresholds should be calibrated very precisely near these levels. The low-volatility grind can mask sharp inflections, especially if headline-driven catalysts, like trade missteps or energy market swings, pile on. Even when broader macro cues are dull, as they often can be this time of year, technical levels like the 200-day average or recent range lows tend to draw the most interest—and liquidity.
With the USD poised on this edge, derivative exposure calibrated too tightly or too slowly may face outsized move risk. Payoff structures for options in particular will need to account for a likely uptick in realised volatility if price slips beneath 1.40. Risk reversals and hedged theta spreads should factor in that breakdown potential, factoring the relatively weak floor just under current spot.
From our perspective, any new swing positioning should preference flexibility. Structured trades that hold up under further CAD strength, even in the face of weaker macro signals, look most sensible. Whether volatility realises that potential or not, maintaining asymmetric reward in that direction puts the odds more squarely in your favour.
