USD/CAD Price Forecast: US-Canada trade war pressures Canadian Dollar

The Canadian Dollar (CAD) trades lower against the US Dollar (USD) on Thursday, with USD/CAD trading marginally higher to near 1.3886. The Loonie faces selling pressure as the ongoing trade war between the United States (US) and Canada has raised Ottawa's economic concerns.

Last week, Washington imposed 50% tariffs on a range of Canadian goods that took effect on Saturday after both nations failed to reach a trade deal. In retaliation, Canadian Prime Minister (PM) Mark Carney also announced retaliatory tariffs of up to 50% on USD 20 billion of imports.

Tariffs seen trimming Canada growth as inflation impact stays modest

According to TD Securities, the newly announced US Section 338 measures and Canada’s response are expected to deliver a measurable drag on activity, with analysts “look[ing] for 338 tariffs and CAD retaliation to shave ~0.3pp from GDP by 2027.”

They note that the growth effects will be “front-loaded over Q3/Q4, while the fiscal response takes longer to materialize,” implying the bulk of the hit will be felt in late 2026 before government support fully offsets some of the damage.

Meanwhile, the US Dollar trades marginally higher, with investors awaiting comments from Federal Reserve (Fed) Chairman Kevin Warsh at the Jackson Hole Symposium on Friday.

USD/CAD Technical Analysis

USD/CAD trades at 1.3887, keeping a bearish tone as spot remains capped beneath the 20-day exponential moving average (EMA) at 1.3908 and the 50.0% Fibonacci retracement at 1.3901.

The Relative Strength Index (RSI) at 44 stays below the midline, hinting at subdued bullish momentum and reinforcing the idea that rebounds are likely to face selling interest rather than extend into a sustained recovery.

On the topside, immediate resistance is clustered around 1.3901/1.3908 from the 50.0% Fibonacci retracement and the 20-day EMA, with further barriers at the 38.2% retracement at 1.3983 and the 23.6% level at 1.4085. On the downside, initial support emerges at the 61.8% retracement at 1.3819, followed by the 78.6% level at 1.3702 and the prior swing low anchor near the 100% retracement at 1.3553, where buyers may attempt to stem deeper losses.