Canadian Dollar stays vulnerable as US-Canada trade war heats up

The Canadian Dollar (CAD) faces uncertainty amid escalating US-Canada trade tensions, as the US Dollar (USD) remains a key driver for its value. The US has imposed 50% tariffs on Canadian goods following failed negotiations, prompting Canada to retaliate with tariffs on $20 billion worth of US imports. This escalation raises concerns about the impact on the Canadian economy, limiting the Loonie's ability to strengthen.

However, Oil prices provide some support for the CAD, as Canada is a major exporter of energy to the United States. Investors are watching the Federal Reserve's decision, with Fed Chair Kevin Warsh's speech at the Jackson Hole Symposium, for clues on interest-rate direction. Persistent inflation in the US, as indicated by rising Personal Consumption Expenditures (PCE) Price Index, and market caution over monetary policy also weigh on the USD/CAD.

Technical analysis shows the CAD hovering around 1.3871, supported by recent intraday buying but facing resistance at 1.3893. On the downside, support is at 1.3865, with further potential at the 1.3825 level. The USD/JPY dropped below 158.00 due to speculation of Japanese authorities intervening to support the Yen, while Gold modestly edged lower.