Canada Returns to Trade Deficit.

The Canadian dollar continued to strengthen in April, reaching its highest level in five months. This was supported by the sharp depreciation of the U.S. dollar, as investors sold off U.S. assets amid growing concerns about recession and rising inflation. Additionally, escalating trade tensions between the U.S. and China significantly impacted confidence in the U.S. economic outlook. After the U.S. raised import tariffs on Chinese goods up to 145%, while maintaining base tariffs of 10% and 25% on steel, aluminum, and automobiles, the 90-day suspension of tariff hikes gave Canada more hope for negotiation. However, growing worries over the overall outlook for the U.S. pushed capital flows back into Canada.

Canada reported a trade deficit of 1.5 billion Canadian dollars—the largest trade deficit in 32 months. Exports dropped sharply while imports increased only slightly. Total imports rose by 0.8% to 71.6 billion Canadian dollars, marking the fifth consecutive month of import growth, following a 2.4% increase in the previous month. Most of the increase came from automotive imports and components, which rose 5.8%, while imports of machinery and industrial equipment increased 3.1%. Imports from the U.S. increased by more than 2.5%.

On the export side, Canada saw a significant drop of 5.5% to 70.1 billion Canadian dollars. Exports declined in 10 out of 11 product categories, with energy exports falling by 6.3% and automotive exports dropping by 8.8%. Exports to the U.S. declined by 3.6%, or about 2.1 billion Canadian dollars, after three consecutive months of growth and peaking in January. This was influenced by concerns over tariffs imposed by President Trump. Exports to countries other than the U.S. also fell sharply, down by 12.4%.

Wholesale sales in Canada rose 0.3% month-on-month to 85.7 billion Canadian dollars, driven by a 7.1% increase in machinery and supply sales. However, sales in the automotive and parts sector slightly declined by 3.1%. In volume terms, wholesale sales rose 0.2% in February. The inventory-to-sales ratio increased to 1.53 from 1.50 in January, indicating rising domestic demand after pressure from tariffs.

The yield on Canada's 10-year government bonds dropped below 3.19% as investors reallocated assets amid changing trade policies and global economic uncertainty. The removal of the 145% tariff on Chinese goods eased concerns about a possible recession. Investors expect that the easing of U.S. tariff measures could support global economic growth, which would benefit export-oriented Canada. However, the potential for future U.S. tariff hikes continues to influence market expectations, even though immediate pressures have slightly eased.

Techical analysis data (5H)

Resistance: 1.3928, 1.3955, 1.3994

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.3823 - 1.3862 but cannot break the support at 1.3862, you may set a TP at approximately 1.3955 and SL at around 1.3796 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.3928 - 1.3955, you may set a TP at approximately 1.3994 and SL at around 1.3823 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.3928 - 1.3955 but cannot break the resistance at 1.3928, you may set a TP at approximately 1.3823 and SL at around 1.3994 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.3823 - 1.3862, you may set a TP at approximately 1.3796 and SL at around 1.3955 or according to your acceptable risk.

Pivot point April 15, 2025 09:15 PM. GMT+7