USD/CAD Faces Critical Resistance as Tariff Tensions Rise

Societe Generale strategists are warning that the Canadian Dollar may struggle to break through key resistance levels against the US Dollar. The pair recently rebounded from a low of 1.3730, but the strategists argue that a failure to break above the current short-term resistance zone of 1.3990-1.4030 could keep the broader decline intact.

The Bank of Canada (BoC) is expected to leave interest rates unchanged, with inflation and growth projections supporting a patient stance. However, renewed US-Canada tariff tensions could inject a more hawkish tone into the outlook.

Headline inflation in Canada returned above 3.0% in July due to higher energy prices, but underlying pressures are less of a concern. The core rate is running at 1.9%, slightly below the 2.0% target.