Steel and Aluminium Tariffs Drive USD/CAD to Eight-Week Low

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3600-1.3830

Euro                 1.5500-1.5730

Sterling            1.8420-1.8640

WTI Oil (opening level) $63.38

The CAD/USD is opening at 1.3708 ( 0.7295 )

The USD/CAD pair may find initial support near the eight-week low at 1.3674, which was recorded on June 2, followed by the lower boundary of the descending channel around 1.3650. A break below the channel would reinforce the bearish bias and put downward pressure on the pair to navigate the region around 1.3419, the lowest since February 2024.

On the upside, the USD/CAD pair may encounter primary resistance at the nine-day of

Exponential Moving Average (EMA) 1.3764. A break above this level could improve the short-term price momentum and support the pair to explore the area around the 50-day EMA at 1.3933, followed by the descending channel’s upper boundary around 1.3960.

A surpassing of the above-mentioned crucial resistance zone could cause the emergence of the bullish bias, driven by the improved medium-term price momentum, and support the pair to approach the eight-week high of 1.4016, which was reached on May 13. 

Headlines

·    Trump signed a Proclamation doubling steel and aluminium tariffs to 50%, effective today. UK tariffs remain at 25% as the 0% deal wasn't implemented in time, while other countries face 50% tariffs, per Bloomberg's Wickham.

·    Job openings increased by 191,000 to 7.391 million in April, showing labour market strength despite trade issues. The OECD cut its 2025 US growth forecast to 1.6% from 2.2% due to policy and tariff concerns. Beijing and Washington accused each other of breaking a trade truce, while Trump's plan to double steel and aluminium tariffs faced EU criticism.

·    US manufactured goods orders fell 3.7% to $594.6 billion in April 2025, the first drop in five months, against a forecasted 3% decline. Transportation equipment orders decreased by 17.1%, with nondefense aircraft and parts plunging 51.5% as tariff concerns led airlines to reduce demand for Boeing aircraft, which received only eight orders.

·    Eurozone inflation fell to 1.9% in May 2025 from 2.2% in April, below the 2.0% forecast, marking its first dip below the ECB's target since September 2024. This supports a rate cut, with services inflation at 3.2%, its lowest since March 2022, energy prices down 3.6%, and non-energy goods inflation steady at 0.6%.

·    Elon Musk publicly criticized Trump’s signature tax bill as a “budget-busting abomination” with Republican fiscal hawks stepping up criticism of the massive fiscal package which will add about $2.5 trillion to the federal deficit over the next decade.

·    Australia's economy grew 0.2% in Q1, slower than expected, due to weak public demand and exports, which were impacted by extreme weather events. The Reserve Bank forecasts growth to hit 2.1% by year-end, driven by spending and lower borrowing costs, with the next cut priced in for July. 

Key Points

·    Equities: Tech surge, DAX leads, tariff/trade optimism

·    Volatility: VIX falls, options market unwinds hedges

·    Digital assets: Bitcoin steady, IBIT/ETHA inflows strong

·    Fixed Income: US treasuries await US labor market data. Important 30-year JGB auction tomorrow

·    Currencies: USD rallies ahead of key labor market data, JPY weakest

·    Commodities: Gold sees profit taking. Crude holds near range top