Canada's economic growth may slow down.

The Canadian dollar remains stable after weakening due to escalating trade tensions, monetary policy divergence, and a slowing economy. Additionally, former U.S. President Donald Trump's threats to impose tariffs on Canadian goods, along with the U.S. tariffs on steel and aluminum, have dampened investor confidence. The Bank of Canada's recent rate cut to 2.75% has widened the interest rate gap between Canada and the U.S., leading to continuous capital outflows.

Meanwhile, Canada's economic growth forecast has been lowered to 0.7% for 2025 and 2026, increasing concerns about a possible recession. Inflation in Canada has slightly risen, largely driven by rapidly increasing tax-related costs, while domestic demand remains sluggish.

Foreign investment in Canadian financial assets stood at 7.9 billion CAD, slowing from the previous net purchases of 13.9 billion CAD. However, this still marks 11 consecutive months of positive investment inflows. The majority of investments remain in debt securities, totaling over 14.5 billion CAD, in line with the upward momentum of bonds, as the Bank of Canada’s rate cuts and economic uncertainty push investors toward safer assets. Conversely, investors sold over 6.6 billion CAD worth of Canadian equities, reflecting concerns over the country’s economic resilience.

Canada's annual inflation rate surged to 2.6% in February, up from 1.9% in the previous month, marking the highest level in eight months. This exceeded market expectations of 2.2% and the Bank of Canada’s forecast of 2.5%. The inflation surge was primarily due to significantly higher import costs, driving food and beverage inflation upward, while other goods also saw increased inflation after easing in the previous month.

The Bank of Canada cut interest rates by 25 basis points to 2.75% in its March meeting, aligning with market expectations. This marks a cumulative reduction of 225 basis points since the beginning of its monetary easing cycle in June 2024. The central bank’s governing council stated that the Canadian economy grew more than expected in Q4, supported by past rate cuts. However, growth is projected to slow this year due to rising trade tensions with the U.S. The bank also noted that the uncertainty surrounding U.S. tariffs has negatively impacted consumer confidence and investment expectations.

The yield on Canada's 10-year government bond surged to 3.14%, rebounding from a two-year low of 2.83%, due to economic uncertainty. Additionally, the ongoing trade conflict between Canada and the U.S. has pushed investors toward safer assets. However, the Bank of Canada has not signaled any future interest rate decisions, given the uncertainty surrounding U.S. trade policy and its impact following the 25% tariff increase on Canadian steel and aluminum. In response, the Canadian government has also imposed retaliatory tariffs on U.S. imports.

Techical analysis data (5H)

Resistance: 1.4372, 1.4387, 1.4416

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.4299 - 1.4328 but cannot break the support at 1.4328, you may set a TP at approximately 1.4387 and SL at around 1.4284 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.4372 - 1.4387, you may set a TP at approximately 1.4416 and SL at around 1.4299 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.4372 - 1.4387 but cannot break the resistance at 1.4372, you may set a TP at approximately 1.4299 and SL at around 1.4416 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.4299 - 1.4328, you may set a TP at approximately 1.4284 and SL at around 1.4387 or according to your acceptable risk.

Pivot point March 21, 2025 10:15 PM. GMT+7