Canadian Dollar falls again as tariff threats loom

• The Canadian Dollar lost nearly half of a percent on Monday at its lowest.
• The Loonie has shed weight against the Greenback for seven straight sessions.
• Canadian PMI figures widely missed the mark, signaling risk of recession.

The Canadian Dollar (CAD) turned tail and ran from the Greenback on Monday, backsliding around one-fifth of one percent after plumbing the depths of a seventh straight bearish session. The Loonie is broadly backsliding as fresh threats of a 25% tariff package on all Canadian goods came from the social media of US President Donald Trump.

President Trump issued threats of steep tariff packages on some of the US’ closest trading allies at the start of his presidency, but after kicking the can repeatedly since January Donald Trump looks set to finally make good on his threat to “punish” foreign countries he has decreed as “taking advantage” of the US by steeply taxing his own constituents. Donald Trump’s tariffs exist in a particular quantum state, where they are both meant to change other countries’ trade behaviour, but are also meant to shore up US government finances, which are facing steep deficits if President Trump’s planned tax and government revenue cuts go through, which are poised to add trillions of dollars to the US government deficit in the coming years.

Daily digest market movers: Fresh tariff threats pummel Canadian Dollar

• The Canadian Dollar is poised for a return to multi-year lows as Loonie weakness pushes USD/CAD back into the 1.4500 region.
• President Trump reiterated his intent to begin 25% tariffs on US imports from Canada on Tuesday.
• The Organization of the Petroleum Exporting Countries (OPEC) also tentatively announced a production limit increase in the coming months, further suppressing the Loonie.
• Canadian officials already have retaliatory tariffs and punitive economic actions prepared for US consumers if tariffs go ahead this week.
• According to Donald Trump, further “reciprocal tariffs” are also slated to begin in April.
• Adding insult to injury, Canadian Purchasing Managers Index (PMI) Manufacturing figures for March declined sharply to 47.8, entirely missing the forecast uptick from 51.6 to 51.9. The survey results index has fallen to its lowest level in a little over a year as recession fears loom over businesses in the face of potential steep trade tariffs.

Canadian Dollar price forecast

Fresh weakness in the Canadian Dollar has bullied USD/CAD higher, clipping into a seventh straight gaining session as the Greenback climbs against the Loonie. After a brief recovery from multi-year highs in January, the Canadian Dollar has resumed waffling against the US Dollar, dragging USD/CAD back into the 1.4500 handle.

The pair is trending back above the 50-day Exponential Moving Average (EMA) near 1.4300, but technical oscillators are beginning to pivot in overbought territory in a clear signal of potential exhaustion. While it’s unlikely that a fresh bout of bullish momentum behind the Loonie will fundamentally change the ongoing trend, a brief pullback period could be on the cards.

USD/CAD daily chart