USD/CAD Price Forecast: Approaches 20-day EMA on the back of US-Canada trade dispute

The US Dollar (USD) showed strength in the European trading session on Wednesday, increasing by 0.2% to around 1.3870 against the Canadian Dollar (USD). The Loonie pair weakened as the Canadian Dollar experienced a decline due to trade tensions between the United States (US) and Canada. In August, President Donald Trump imposed 50% tariffs on various Canadian goods after the two nations failed to agree on a trade deal.

In response, Canadian Prime Minister Mark Carney announced that Canada would retaliate with its own tariffs starting September 8, as reported by CNBC. The trade tensions have intensified following Canada's decision to impose retaliatory tariffs on up to 50% of USD 20 billion in US imports. While the Canadian measures are seen as proportional and aimed at strengthening Canada's negotiating position, they may create uncertainty for businesses and risk added pressure on prices and supply chains.

The US Dollar is trading slightly higher ahead of the release of US Personal Consumption Expenditure Price Index (PCE) data for July, which is expected to show steady inflation at 3.3% Year-on-Year (YoY) and a monthly increase of 0.2%. In the daily chart, the USD/CAD pair trades at 1.3869, below the 20-period exponential moving average (EMA) at 1.3909 and the 50.0% Fibonacci retracement level at 1.3901, suggesting a bearish near-term outlook.

Support is found at the 61.8% Fibonacci retracement at 1.3819, while resistance lies at the 50.0% retracement at 1.3901 and the 20-EMA at 1.3909.