USD/CAD Trades Below 1.3750 Amid Dovish Fed Talk and Trade Tensions

USD/CAD Trades Below 1.3750 Amid Dovish Fed Talk and Trade Tensions

The USD/CAD pair is trading modestly lower in the Asian session on Friday, hovering just below the mid-1.3700s and stepping away from its recent three-and-a-half-week high of 1.3775 reached on Thursday. Despite the pullback, the pair lacks clear bearish conviction, reflecting mixed sentiment in the market.

Fed’s Waller Reignites Rate Cut Talk, Pressures USD

The US Dollar (USD) is retreating from its recent highs following dovish remarks from Federal Reserve Governor Christopher Waller, who urged policymakers to lower the interest rate target in July. Waller’s comments, citing rising risks to the economy, introduced short-term downside pressure on the USD and weighed on USD/CAD.

However, broader market expectations are still divided, with many investors betting the Fed may delay cuts due to persistent inflationary concerns. This limits the USD downside, keeping the currency pair supported near key levels.

Canadian Dollar Faces Headwinds from Tariffs and Oil Volatility

While the Canadian Dollar (CAD) found some support from softer USD dynamics, momentum is capped due to broader uncertainty surrounding trade. US President Donald Trump recently imposed a 35% import tariff on Canadian goods, set to take effect August 1, raising concerns about the Canadian trade outlook.

Additionally, a reversal in oil price gains—a key driver for the Canadian economy—has also tempered CAD bullishness. The uncertainty in energy markets adds another layer of complexity to CAD price action.

Technical Outlook: Bearish But Unconvincing

Despite trading slightly lower, USD/CAD lacks strong bearish momentum. The mid-1.3700s act as immediate support, and the broader trend remains dependent on upcoming US data and geopolitical developments.

• Immediate resistance: 1.3775 (weekly high)
• Immediate support: 1.3700, followed by 1.3640