To tariff or not to tariff, that is the question in the USDCAD

President Trump yesterday announced plans to impose a 25% tariff on Canadian and Mexican imports starting February 1, though he suggested oil imports might be exempt.

This announcement caused significant volatility in USDCAD. The pair surged from around 1.4400 to a high of 1.4594, marking new highs since 2020, before retracing below 1.45158, a key level established on January 21 during earlier tariff-related news. The pair also re-entered the “Red Box” trading range, which has defined movement since December 17. That Red Box is from 1.4489 to 1.44664. The high swing area of the range comes in at 1.4448 to 1.4466.

• Key Levels to Watch:
  • Support Zone: High swing area within the “Red Box” at 1.4448–1.4466. Staying above this zone could lead to further upside momentum.
  • Bearish Signal: If the price trades back below 1.4448, buyers could lose momentum/hope, potentially leading to downside exploration.

Traders should monitor these levels closely for directional cues today, but news headlines will be a key risk that could lead to sharp moves one way or the other. So understand the liquidity and gap risk in your trading.

This article was written by Greg Michalowski at www.forexlive.com.