Morning Note: USD Jumps on Trump’s Tariffs as CAD and Bitcoin Face Pressure

Dollar Soars as Trump’s Tariffs Spark Trade Tensions

The dollar index improved by about one percent to around 109.8 on Monday, setting a two-year-high mark after President Donald Trump imposed broad tariffs on major trading partners this past weekend, igniting fears over a possible inflation rebound. With a 25% tariff on imports from Mexico and Canada along with a 10% duty on Chinese products, the U.S. enacted harsh tariffs.

Canada started its own retaliatory measures. Mexico stated that it was considering tariffs on U.S. imports, and the Chinese announced their intention to file a case with the World Trade Organization, which they did later. The traders adjusted their expectations for cuts in Fed Fund rates and expect roughly 41bps in cuts for the entire year.

(U.S Dollar Index Daily Price Chart, Source: Markets.com)

From a technical analysis perspective, the overall trend of the U.S. dollar remains bullish, as indicated by the higher highs and higher lows. The recent price action has broken through the bullish correction channel, with strong bullish momentum and a gap-up movement. However, it is now facing a challenge in the previous rectangular resistance area. If it can break through this resistance upwards, it is highly likely to drive the price even higher.

Canadian Dollar Weakens Due to U.S. Tariffs

Mexican President Claudia Sheinbaum accused the U.S. of failing to address its fentanyl crisis, uttering that tariffs would not resolve the issue. She announced that further details on Mexico’s retaliatory tariffs, imposed over the weekend, would be provided on Monday.

On Sunday, Canada declared its intention to file a legal challenge through appropriate international bodies to contest these tariffs. Canadian Prime Minister Justin Trudeau told the citizens to boycott their long-standing friend after announcing retaliatory tariffs on $155 billion worth of U.S. goods, such as peanut butter, beer, wine, lumber, and appliances. At the same time, Canadian officials said they were preparing measures to support businesses affected by the trade dispute.

(USD/CAD Daily Price Chart, Source: Markets.com)

From a technical analysis perspective, the overall trend of the USD/CAD currency pair remains bullish, as indicated by the higher highs and higher lows. It has broken through the previous oscillation zone with strong bullish momentum and a large gap-up movement. However, it is crucial to observe whether the price action will undergo a bullish correction and fill the gap.

Bitcoin Dips Sharply on U.S. Tariffs

The crypto market has been on the brink of liquidation, worth more than $1 billion long and short, in the last 24 hours after Trump's announcement of the non-terrible tariffs on imported goods triggered selloffs in risk assets.

Trump's plan to impose 25% tariffs on goods from Canada and Mexico and 10% tariffs on Canadian energy and Chinese imports is set to take effect on Tuesday. This has renewed inflation concerns, as further tariffs could put further pressure on prices, negatively affecting risk assets, which should include cryptocurrencies. Lack of Federal stimulus and high interest rates hit altcoins disproportionately, continuing their underperformance.

(Bitcoin Daily Price Chart, Source: Markets.com)

The price action for Bitcoin has been moving within an oscillation zone, as indicated by the rectangular support and resistance levels. Recently, the price retested the support zone and rebounded. If the price manages to close the daily candle with bullish momentum, this suggests a high possibility of the price rebounding from this support zone and continuing its bullish movement.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.