We are pleased to bring you the latest edition of the series produced by our colleagues in RBC Capital Markets, hosted by George Davis, CMT, the award winning Chief Technical Analyst for Fixed Income and Currency Strategy. In this installment, the Spring Economic Briefing, George focuses on three main themes; tariffs, his economic outlook including growth and monetary policy forecasts followed by a more specific discussion on the Canadian dollar.
On this, George finishes off by highlighting some key support and resistance levels to incorporate into hedging strategies. On the latter, the support trend line at 1.3680 has been guiding USDCAD higher since 2021. Any break below here would end the longer-term uptrend and point to more CAD weakness towards the 1.3400 area and then 1.3200 thereafter. On the topside, resistance has been building recently at the 1.4000 level.
However, from a longer-term perspective, we have had three significant runs toward 1.4700 dating back to 2015, then during Covid and finally during the first wave of tariffs in February. On all three occasions, USDCAD came off very quickly and very sharply from the 1.4700 level back to the 1.4000 area.
USD sellers should look to rallies toward the 1.40/1.41 area as an initial opportunity to reduce exposure. USD buyers should look at approaches toward 1.3700 to start to layer in.