USDCAD: Canada Hits Back and Wall Street Watches CloselyUS Dollar vs Canadian DollarACTIVTRADES:USDCADActivTradesIon Jauregui – Analyst at ActivTrades There are times when you look at a currency pair and discover that behind a price there is much more than two currencies facing each other. That is what is happening now with USDCAD. Canada has hit back at “Uncle Trump” and the trade war is once again raising a question that goes far beyond the Canadian dollar: to what extent could a new escalation in trade tensions end up affecting Wall Street as well? Canada has responded to Washington’s tariffs with duties on around $20 billion of U.S. goods, along with support measures for companies and workers. The problem is not only the amount involved. The United States and Canada maintain deeply integrated supply chains, and any new trade barrier can be passed on to costs, corporate margins and growth expectations. This is where USDCAD becomes interesting. Since 2024, the pair has been moving within a broad range between 1.34185 and 1.42476 Canadian dollars per U.S. dollar. With the current price close to 1.38830, it remains in the middle of the range and, for now, without a structural breakout. In the short term, however, the price has started to recover. The RSI is coming out of oversold territory and the MACD is showing a timid improvement in momentum. But the moving averages maintain a clearly bearish trend, so there is still no confirmation of a trend change. Technically, therefore, I would describe this as a recovery within an still-bearish structure. The 1.40 area will be a first reference, while 1.42476 represents the upper part of the range. On the downside, 1.34185 remains the structural support. But USDCAD does not move in isolation. There is another fundamental protagonist: oil. WTI has been heavily influenced by the war between the United States and Iran. The geopolitical premium pushed prices higher, but expectations of de-escalation subsequently triggered a strong correction. Crude is now around $81.29 and, although it maintains a corrective trend, the latest sessions have been building a sideways movement. This matters for the CAD. Canada is one of the main oil suppliers to the United States, and the evolution of crude has a significant influence on its currency. Strong oil prices can support the CAD and limit the advance of USDCAD; another correction in crude could remove part of that support. But there is now a second force: the trade war. If tariffs deteriorate expectations for the Canadian economy at the same time that oil loses strength, both factors could put pressure on the CAD. In that scenario, USDCAD would have arguments to continue recovering. The connection with the S&P 500 is not mechanical either. A rising USDCAD does not necessarily mean that Wall Street will fall. Both markets may be reacting to the same factor: an increase in perceived risk. Tariffs can raise costs, reduce margins and affect corporate earnings. They can also fuel inflation and limit the Federal Reserve’s room for manoeuvre. And if uncertainty increases, appetite for risk assets may deteriorate. The problem is that the S&P 500 enters this scenario close to record highs and with little room for disappointment. The latest Reuters poll puts the index at around 7,900 points by the end of 2026, approximately 3% above current levels, supported by earnings growth and optimism surrounding artificial intelligence. That is why, personally, I think it is worth watching the three markets together. Oil tells us about inflation, energy and growth. USDCAD reflects the combination of the dollar, CAD, trade and commodities. And the S&P 500 shows how much risk Wall Street is willing to take. For now, the USDCAD chart calls for caution. RSI is recovering, MACD is beginning to improve and the price is rebounding, but the moving averages remain bearish. There is still no confirmation of a trend change. The signal would be much more relevant if the pair breaks above 1.40, approaches 1.42476 and the moving averages begin to turn higher. Until that happens, we are looking at a recovery within a range. And here, in my opinion, is the really interesting question: what is USDCAD pricing in that Wall Street has not yet priced in? Because if the Canadian dollar continues to weaken while trade tensions increase and oil loses strength, USDCAD could be anticipating a deterioration in economic expectations that is not yet fully reflected in the S&P 500. With the index close to record highs and strategists expecting only another 3% gain by year-end, perhaps it is worth looking at the currency market as well to understand how much room for error Wall Street still has. ******************************************************************************************* The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication. All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. 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