Canadian Dollar faces double trouble from Oil slump, US tariffs
USD/CAD trades around 1.3835 on Tuesday at the time of writing, down a modest 0.07% on the day. The pair lacks a clear direction as both the US Dollar (USD) and the Canadian Dollar (CAD) face headwinds.
On Tuesday, the Canadian Dollar faced dual challenges stemming from the decline in oil prices and potential US tariffs. The USD/CAD pair traded around 1.3835, fluctuating without a clear direction as both currencies encountered headwinds. Falling oil prices, particularly West Texas Intermediate (WTI) Oil, which dropped 3.35% to $81.75, affected the Canadian Dollar due to Canada's status as a major crude exporter.
However, this impact was mitigated by the weakening US Dollar and mixed economic data. US President Donald Trump announced the removal of mines from the Strait of Hormuz, easing concerns about energy supply risks and reducing the geopolitical risk premium in oil prices. Simultaneously, the US Dollar Index (DXY) fell slightly, and US economic indicators did not bolster the Dollar's strength.
Canadian government retaliatory tariffs on around $20 billion worth of US products were announced, coupled with a C$7.5 billion support package for affected businesses and workers. Despite these developments, the CAD remained marginally lower on Tuesday, primarily due to falling oil prices. Technical analysis indicated resistance levels at 1.3858, with support at 1.3732 and 1.3550.
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