The Canadian Dollar (CAD) experienced a significant boost overnight following reports that Prime Minister Justin Trudeau may resign this week. Additionally, speculation that U.S. President-elect Donald Trump might scale back plans for widespread tariffs has further supported the CAD, according to Scotiabank’s Chief FX Strategist, Shaun Osborne.
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Political Uncertainty Surrounding PM Trudeau’s Possible Resignation
Reports suggest that if Prime Minister Trudeau steps down, Canada could face a period of political uncertainty.
- A leadership contest for the Liberal Party may take up to three months to complete.
- Parliament might be suspended during this process.
- Opposition parties could push for a general election, which would require additional time for organization.
While clarity on domestic political matters would be welcomed, the prolonged timeline could weigh on market confidence in the medium term.
Impact on the Canadian Dollar
In the short term, the Canadian Dollar is benefiting from the latest headlines. However, Osborne notes that it may take time for the “political fog” to clear completely.
Technical Analysis: USD/CAD Trends
Recent market movements show a dramatic shift in the USD/CAD technical outlook:
- Key Resistance and Support Levels
- The USD/CAD has been consolidating around the 1.44 level entering the new year.
- Spot prices have broken below the critical 1.4335 support level, triggering a bearish “double-top” pattern on the daily chart.
- Potential Downside for the USD/CAD
- If the break below 1.4335 holds, the USD/CAD may drop to the 1.4200/1.4210 range within 1-2 weeks.
- However, any reversal above 1.4335 could negate this bearish momentum.
CAD Remains Steady Within 1.44 Range Scotiabank
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What Lies Ahead for the CAD?
The Canadian Dollar’s recent strength could persist if political developments and U.S. trade policy remain favorable. However, traders should remain cautious as extended political uncertainty in Canada might dampen optimism in the long run.
For now, all eyes remain on potential announcements from Prime Minister Trudeau and further clarity on U.S. trade policies under President-elect Trump.
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