Economic Pressure on Canada: With Canada sending 75-80% of its exports to the US, these tariffs could significantly disrupt Canadian trade, weakening the Canadian dollar (CAD) relative to the US dollar (USD).

Inflationary Concerns in the US: While the tariffs might increase inflationary pressures in the US, they could also bolster the USD as market participants anticipate tighter monetary policy from the Federal Reserve to combat inflation.

Market Sentiment: The uncertainty surrounding US-Canada trade relations may further pressure the CAD, while the USD benefits from its safe-haven status amid geopolitical tensions.

CFTC Positioning: Leveraged funds have built substantial long USD positions, indicating strong bullish sentiment for the USD, which could extend gains against the CAD in the short term.

Long USDCAD

Jan 22 2025