USDCAD is on the verge of a massive breakout, especially after Trump’s recent remarks. President-elect Donald Trump signaled potential tariffs on China, Mexico, and Canada yesterday. Trump brought attention to fentanyl trafficking, accusing China of failing to enforce the promised death penalty on drug traffickers. He also stated that the U.S. would impose a 10% tariff on China until the drug flow stops.
Trump further commented, “Thousands of people are pouring through Mexico and Canada, bringing crime and drugs at levels never seen before.” He announced plans to impose an additional 25% tariff on Canada and Mexico until illegal immigration and drug trafficking are effectively addressed.
In response, Canadian Deputy Prime Minister Chrystia Freeland addressed Trump’s remarks, stating that U.S. and Canadian law enforcement agencies are actively collaborating to stop traffickers and will continue their efforts during Trump’s administration. Freeland also highlighted that Canada buys more goods from the U.S. than China, Japan, France, and the U.K. combined. She added that Canada provides 60% of U.S. crude oil imports, which are critical to the U.S. domestic energy supply.
(USDCAD Daily Chart)
Trump’s tariff plan is already having a significant impact on the FX market, and after yesterday’s speech, USDCAD is on the verge of breaking through a critical resistance level that could set the currency’s direction for months to come. The 1.3850-1.3950 resistance zone has been holding back upward advances since mid-2022. This resistance has been tested six times, with each attempt resulting in a rejection—until Trump won the presidency. His victory is expected to bring fundamental changes to U.S. economic and foreign policy, providing a solid fundamental backdrop for a potential breakout.
On the technical side, we’ve seen a breakout from this resistance zone to 1.41, followed by a retest. Now, the previous top at 1.41 is being tested again, forming what appears to be a textbook setup for further upside. If this pattern plays out, USDCAD could reach the 1.45–1.46 zone in the medium term.
However, it’s important to note that this may still be a negotiation tactic by Trump, and market conditions could shift rapidly depending on his next moves. Additionally, 1.41 has not yet been decisively broken, so Canadian dollar bears should exercise caution despite the “perfect setup.”
