The Canadian economy may experience a slight slowdown due to the impact of tariffs.

The Canadian dollar has weakened again after strengthening to a 6-month high, pressured by a stronger US dollar amid easing concerns about the independence of the central bank. Additionally, trade tensions have resurfaced as the US may engage in negotiations with China to discuss reducing previously increased import tariffs. Meanwhile, the International Monetary Fund's (IMF) downward revision of Canada's 2025 GDP forecast to 1.4% has triggered concerns about domestic demand. Furthermore, investors anticipate that the Bank of Canada may implement further interest rate cuts in the latter half of the year, contributing to the depreciation of the Canadian dollar, despite the central bank holding its interest rate steady at its latest meeting.

The Bank of Canada maintained its key interest rate at 2.75% at its April meeting, as widely expected by the market. This marks the first time the bank has held rates steady after a cumulative reduction of 2.25% and ends a sequence of seven consecutive rate cuts. The Monetary Policy Committee stated that uncertainty surrounding tariffs could slow domestic economic growth, while upside risks to inflation have increased. Therefore, maintaining the current interest rate is deemed appropriate given the current situation and heightened uncertainty stemming from the lack of clear US tariff direction. However, the Bank of Canada anticipates that domestic economic growth will temporarily weaken and inflation will remain close to the 2% target.

Canada's annual inflation rate fell to 2.3% in March, down from an 8-month high of 2.6% in the previous month. This was below the Bank of Canada's forecast of 2.5%. The decline marks the beginning of the anticipated slowdown in inflation this year, driven by a sharp drop in crude oil prices after OPEC+ confirmed its plan to increase production, leading to a slowdown in transportation inflation as well. However, food costs surged by 3.2%.

Foreign investors reduced their net investment in Canadian securities by $6.46 billion CAD in February, marking the first net outflow after 11 consecutive months of inflows. This decline was primarily driven by the sale of equities, amounting to over $21.94 billion CAD, reflecting a global sell-off of risk assets amid increasing uncertainty surrounding US trade policies and the potential for a global economic slowdown. Conversely, there was a net inflow of $15.48 billion CAD into the bond market.

The CFIB Business Barometer, which measures expectations for business performance over the next 12 months, rose to 34.8 in April. Despite recovering from the previous month's reading of 25.5, the latest figure still indicates a negative outlook among businesses regarding domestic growth. This highlights the increasing impact of tariffs, trade wars, and various restrictions that have led to a rapid decline in business confidence. Regarding employment, 17% of companies plan to lay off staff, while only 12% anticipate hiring.

Techical analysis data (5H)

Resistance: 1.3874, 1.3882, 1.3899

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.3832 - 1.3849 but cannot break the support at 1.3849, you may set a TP at approximately 1.3882 and SL at around 1.3824 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.3874 - 1.3882, you may set a TP at approximately 1.3899 and SL at around 1.3832 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.3874 - 1.3882 but cannot break the resistance at 1.3874, you may set a TP at approximately 1.3832 and SL at around 1.3899 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.3832 - 1.3849, you may set a TP at approximately 1.3824 and SL at around 1.3882 or according to your acceptable risk.

Pivot point April 24, 2025 09:25 PM. GMT+7