Canadian Dollar struggles on Tuesday, tests 55-month low

• The Canadian Dollar took a plunge on Crude Oil weakness on Tuesday.
• Canada is almost entirely absent from the economic calendar this week.
• Geopolitical headlines about Israel-Hezbollah ceasefire stabilize energy markets.

The Canadian Dollar (CAD) got knocked lower on Tuesday, declining to a fresh four-plus-year low point against the Greenback. The economic calendar was a thin affair on Tuesday, with markets broadly focused on geopolitical events and renewed tariff threats from incoming US President Donald Trump.

Canada is almost entirely absent from the economic calendar this week, with Loonie traders forced to wait until Friday for Canadian quarterly growth figures. The CAD has been left exposed to broad market flows in the meantime, keeping USD/CAD bid into the attic.

Daily digest market movers: Loonie buckles after tariff threats and Israel ceasefire

• The Loonie found a fresh 55-month low on Tuesday, sending USD/CAD to 1.4178 in intraday trading.
• President-elect Donald Trump reiterated his campaign threats to impose sweeping tariffs on all goods imported into the US, verbally targeting Canada with an across-the-board 25% import fee when he takes office in January.
• Markets broadly shrugged off the economically devasting threat as investors continue to believe former President Trump will be dissuaded from revisiting the Smoot-Hawley era of US history that devastated the US economy during the Great Depression.
• Israel has inked a ceasefire deal with Lebanon, sending Crude Oil markets lower and dragging the Canadian Dollar lower in a knock-on effect as the Loonie remains exposed to Crude Oil prices.

Canadian Dollar price forecast

After briefly visiting a new four-and-a-half year low on Tuesday, the Canadian Dollar has pulled back somewhat, moderating slightly and keeping USD/CAD bids below 1.4100 for the time being. The pair is knocking on the high end of a long-term technical congestion pattern that has plagued price action since 2016 when the Loonie backslid to its lowest prices against the Greenback since early 2003.

Momentum traders could be looking for a downside break in USD/CAD bids to drag the pair back to a medium-term inflection point near the 1.3000 handle, a price that long-term trends have cycled for nearly a decade, but in the interim, broad-market Greenback strength continues to keep USD/CAD bid into the high end.

USD/CAD daily chart