Canadian Dollar Forecast: USD/CAD Primed for Trump's Liberation Day

By : James Stanley , Sr. Strategist

March 28, 2025 3:32 PM

Canadian Dollar, USD/CAD Talking Points:

Next week brings another important date in the tariff topic with April 2^nd being called ‘Liberation Day’ from President Donald Trump.
As USD/CAD winds down Q1 the pair’s price action has tightened into a triangle, which when taken with the prior bullish trend can be classified as a bull pennant.
The April 2^nd tariff date can have impact on both the U.S. and Canadian Dollar; but there remains a plethora of questions around execution of tariffs, explored further below.

The April 2^nd tariff date is fast approaching and Trump has previously called this ‘Liberation Day.’ So, while multiple tariff start dates have been in the conversation over the past few months, it seems that there could be reason to drive ahead this time. The big item is the reciprocal tariffs that President Trump began talking about in February, and with his emergency economic authority, this is something that could come into effect almost immediately after next week’s deadline.

But there’s still the massive question execution, which would then lead to impact.

U.S. Treasury Department Secretary Scott Bessent has said that on April 2^nd, each country would receive a number that they believe represents their tariffs, and for some countries, the number could be quite low while other countries could see a higher number. There’s quite a bit that’s open to interpretation there but from the initial sound of it, that number would seem to be a starting point for negotiations, in some way. And the April 2^nd tariff start date would be when we (and the countries being targeted) can begin to gauge potential impact of the increased tariffs, not to mention potential responses from countries being targeted.

For Canada, there’s several products in the discussion such as autos or fertilizer; at the prior tariff date of March 6^th, Trump exempted imports covered by the USMCA (United States-Mexico-Canada Agreement) until April 2^nd, and this covered approximately 38% of imports from Canada, including autos and auto parts, agricultural products, manufactured goods like electronics, textiles and chemical products.

Canada’s digital services tax would be an obvious focal point for next week but given the Trump administration’s prior mention that VAT would be included in tariffs, this could also apply to Canada’s goods and services tax, which is levied on both domestic and foreign goods. In the U.S., sales taxes are imposed by individual states so there’s a mismatch in current policy between the two nations’ approach to consumption taxes.

Dairy is also an obvious target for tariffs as Trump has mentioned in the past that Canada charges over 200% on U.S. dairy products. But there’s some important details in there that could complicate a reciprocity arrangement: The tariffs only apply to imports exceeding a maximum set by the CUSMA. In this year’s tariff arrangement, some milk and cream products within the set quota are charged at 7.5%, while imports above that threshold are then levied at 241%. There’s wide ranging debate around the quota levels, of course, which sparks an entirely new debate, but these are the types of topics that will be in the crosshairs as the U.S. side of the table attempts to even out levies charged between countries.

Which ultimately draws down to the question of impact…

USD/CAD Fear Has Continued to Die Down

When the tariff topic first hit the headlines back in November, shortly after the election, USD/CAD put in its first notable break of the 1.4000 level in more than four years. And as those tariff tensions continued to rise in December, with Trump first bringing out the ‘51^st state’ narrative and calling Trudeau a governor, USD/CAD continued to march higher.

Tensions were pretty firm around the New Year open, as was the upside trend in USD/CAD. Initially, tariffs were said to come into effect on ‘day one’ of Trump’s term, but when that didn’t happen the pair pulled back. Tariffs were then set to come into effect on February 1^st, and that’s when the tension seemed to climax as USD/CAD broke out in a very big way at the February open, hitting a fresh 20-plus year high. But, when that tariff date was pushed back to March, the pair slid and reversed those prior gains.

Since then, it’s been equalized price action, with USD/CAD building a symmetrical triangle over the past two months. Those formations can be read in a couple of different ways, but perhaps most importantly is the illustration of the ‘known knowns’ being priced in, as governed by the tighter and tighter range. Normally, a symmetrical triangle comes with little to no directional bias; because, after all, it’s just prices coiling into a smaller and smaller range. But for this one, given the prior bullish trend, there could be a case as a bull pennant formation, as looked at last week. That would allow for a possible bullish bias in looking at resolution of the triangle. But perhaps the bigger question is whether a bullish break of that triangle would have the staying power to drive into a fresh multi-year high in USD/CAD.

USD/CAD Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

Longer-Term Range Still Applies

As I’ve been saying since last November, my expectation is that the bigger picture range in USD/CAD will prevail. And at this point, the pair remains in that same pattern that’s been in-play for the past nine-plus years.

There could be massive repercussions if that’s not the case; if we see USD-strength to the degree that USD/CAD pushed up to 1.5000, there would be a degree of economic dislocation. A USD that strong would have impact on U.S. economic fundamentals, and a Canadian Dollar that weak would likely drive inflation in Canada to the degree that the Central Bank would have to respond, in some way, and that would likely have to come with economic tightening. For a Canadian economy that’s been supported with rate cuts of late, that could further hit growth; and previously Canadian officials have said that if there is a trade war, they would provide ‘pandemic like support’ for the economy, which could further exacerbate CAD-weakness, and inflation, which could in-turn demand more rate hikes.

It’s a dizzying scenario to project which is why I think markets have grown more comfortable with the idea that a prolonged tariff scenario may not come to fruition, especially given the multiple delays that have already happened.

With that said, the longer-term range doesn’t necessarily mean that prices have to automatically come down, and as we see tensions tighten into April 2^nd, there could be a case for another run at the highs; and if that fails and profit taking takes over, then the range-fill scenario retains attraction.

USD/CAD Monthly Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/CAD Shorter-Term

While both weekly and monthly charts retain some clarity with the big picture, the daily chart is a bit messier, and this complicates near-term strategy in USD/CAD.

But, incorporating what was shared above, for those that are looking to take a bearish stance in anticipation of the longer-term range continuing, it’s the 1.4500 level that sticks out as resistance. That’s the price that bulls failed to drive through and, so far, that’s led to lower-highs over the past couple of months. The 1.4371 level is of interest below that and if we see a daily candle with a wick at that level, it could indicate a lower-high setup.

So, perhaps a bullish move next week around the tariff topic could open the door for some opportunity for bears, particularly if resistance can hold around either of the above-mentioned levels.

The support side of the pair has been tricky, as this week saw a fresh monthly low print, but then bears suddenly slowed the push and that allowed for pullback over the 1.4300 level.

The big level of importance on a longer-term basis and something that speaks to range continuation potential of the longer-term move is that 1.4000 level noted above, and once bears can finally sustain a breach below that level, provided that it happens without any prolonged bullish trends above 1.5000, that bigger picture range continuation theme will remain as attractive. Before that comes into the picture, both 1.4200 and 1.4100 could present as shorter-term supports.

USD/CAD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Strategist

Canadian Dollar, USD/CAD Talking Points:

Next week brings another important date in the tariff topic with April 2^nd being called ‘Liberation Day’ from President Donald Trump.
As USD/CAD winds down Q1 the pair’s price action has tightened into a triangle, which when taken with the prior bullish trend can be classified as a bull pennant.
The April 2^nd tariff date can have impact on both the U.S. and Canadian Dollar; but there remains a plethora of questions around execution of tariffs, explored further below.

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The April 2^nd tariff date is fast approaching and Trump has previously called this ‘Liberation Day.’ So, while multiple tariff start dates have been in the conversation over the past few months, it seems that there could be reason to drive ahead this time. The big item is the reciprocal tariffs that President Trump began talking about in February, and with his emergency economic authority, this is something that could come into effect almost immediately after next week’s deadline.

But there’s still the massive question execution, which would then lead to impact.

U.S. Treasury Department Secretary Scott Bessent has said that on April 2^nd, each country would receive a number that they believe represents their tariffs, and for some countries, the number could be quite low while other countries could see a higher number. There’s quite a bit that’s open to interpretation there but from the initial sound of it, that number would seem to be a starting point for negotiations, in some way. And the April 2^nd tariff start date would be when we (and the countries being targeted) can begin to gauge potential impact of the increased tariffs, not to mention potential responses from countries being targeted.

For Canada, there’s several products in the discussion such as autos or fertilizer; at the prior tariff date of March 6^th, Trump exempted imports covered by the USMCA (United States-Mexico-Canada Agreement) until April 2^nd, and this covered approximately 38% of imports from Canada, including autos and auto parts, agricultural products, manufactured goods like electronics, textiles and chemical products.

Canada’s digital services tax would be an obvious focal point for next week but given the Trump administration’s prior mention that VAT would be included in tariffs, this could also apply to Canada’s goods and services tax, which is levied on both domestic and foreign goods. In the U.S., sales taxes are imposed by individual states so there’s a mismatch in current policy between the two nations’ approach to consumption taxes.

Dairy is also an obvious target for tariffs as Trump has mentioned in the past that Canada charges over 200% on U.S. dairy products. But there’s some important details in there that could complicate a reciprocity arrangement: The tariffs only apply to imports exceeding a maximum set by the CUSMA. In this year’s tariff arrangement, some milk and cream products within the set quota are charged at 7.5%, while imports above that threshold are then levied at 241%. There’s wide ranging debate around the quota levels, of course, which sparks an entirely new debate, but these are the types of topics that will be in the crosshairs as the U.S. side of the table attempts to even out levies charged between countries.

Which ultimately draws down to the question of impact…

USD/CAD Fear Has Continued to Die Down

When the tariff topic first hit the headlines back in November, shortly after the election, USD/CAD put in its first notable break of the 1.4000 level in more than four years. And as those tariff tensions continued to rise in December, with Trump first bringing out the ‘51^st state’ narrative and calling Trudeau a governor, USD/CAD continued to march higher.

Tensions were pretty firm around the New Year open, as was the upside trend in USD/CAD. Initially, tariffs were said to come into effect on ‘day one’ of Trump’s term, but when that didn’t happen the pair pulled back. Tariffs were then set to come into effect on February 1^st, and that’s when the tension seemed to climax as USD/CAD broke out in a very big way at the February open, hitting a fresh 20-plus year high. But, when that tariff date was pushed back to March, the pair slid and reversed those prior gains.

Since then, it’s been equalized price action, with USD/CAD building a symmetrical triangle over the past two months. Those formations can be read in a couple of different ways, but perhaps most importantly is the illustration of the ‘known knowns’ being priced in, as governed by the tighter and tighter range. Normally, a symmetrical triangle comes with little to no directional bias; because, after all, it’s just prices coiling into a smaller and smaller range. But for this one, given the prior bullish trend, there could be a case as a bull pennant formation, as looked at last week. That would allow for a possible bullish bias in looking at resolution of the triangle. But perhaps the bigger question is whether a bullish break of that triangle would have the staying power to drive into a fresh multi-year high in USD/CAD.

USD/CAD Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

Longer-Term Range Still Applies

As I’ve been saying since last November, my expectation is that the bigger picture range in USD/CAD will prevail. And at this point, the pair remains in that same pattern that’s been in-play for the past nine-plus years.

There could be massive repercussions if that’s not the case; if we see USD-strength to the degree that USD/CAD pushed up to 1.5000, there would be a degree of economic dislocation. A USD that strong would have impact on U.S. economic fundamentals, and a Canadian Dollar that weak would likely drive inflation in Canada to the degree that the Central Bank would have to respond, in some way, and that would likely have to come with economic tightening. For a Canadian economy that’s been supported with rate cuts of late, that could further hit growth; and previously Canadian officials have said that if there is a trade war, they would provide ‘pandemic like support’ for the economy, which could further exacerbate CAD-weakness, and inflation, which could in-turn demand more rate hikes.

It’s a dizzying scenario to project which is why I think markets have grown more comfortable with the idea that a prolonged tariff scenario may not come to fruition, especially given the multiple delays that have already happened.

With that said, the longer-term range doesn’t necessarily mean that prices have to automatically come down, and as we see tensions tighten into April 2^nd, there could be a case for another run at the highs; and if that fails and profit taking takes over, then the range-fill scenario retains attraction.

USD/CAD Monthly Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/CAD Shorter-Term

While both weekly and monthly charts retain some clarity with the big picture, the daily chart is a bit messier, and this complicates near-term strategy in USD/CAD.

But, incorporating what was shared above, for those that are looking to take a bearish stance in anticipation of the longer-term range continuing, it’s the 1.4500 level that sticks out as resistance. That’s the price that bulls failed to drive through and, so far, that’s led to lower-highs over the past couple of months. The 1.4371 level is of interest below that and if we see a daily candle with a wick at that level, it could indicate a lower-high setup.

So, perhaps a bullish move next week around the tariff topic could open the door for some opportunity for bears, particularly if resistance can hold around either of the above-mentioned levels.

The support side of the pair has been tricky, as this week saw a fresh monthly low print, but then bears suddenly slowed the push and that allowed for pullback over the 1.4300 level.

The big level of importance on a longer-term basis and something that speaks to range continuation potential of the longer-term move is that 1.4000 level noted above, and once bears can finally sustain a breach below that level, provided that it happens without any prolonged bullish trends above 1.5000, that bigger picture range continuation theme will remain as attractive. Before that comes into the picture, both 1.4200 and 1.4100 could present as shorter-term supports.

USD/CAD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Strategist