The USD/CAD pair is trading cautiously around 1.3850 on Tuesday, with the Canadian Dollar (CAD) showing modest resilience against the US Dollar (USD). The move comes after US President Donald Trump dismissed Federal Reserve (Fed) Governor Lisa Cook over allegations related to her mortgage holdings in Michigan and Georgia.
Trump had earlier urged Cook to resign following criticism from his political allies. Market analysts view her removal as a blow to the Fed’s independence, raising concerns that future policy decisions could be influenced more directly by political agendas.
The US Dollar Index (DXY), which measures the Greenback against six major peers, is hovering near 98.30, reflecting mild downward pressure.
Looking ahead, investors will closely monitor July’s US Personal Consumption Expenditure (PCE) Price Index for fresh insights into the Fed’s monetary policy stance. Last week, Fed Chair Jerome Powell signaled a dovish tilt at the Jackson Hole Symposium, citing mounting labor market risks.
On the Canadian side, sentiment remains neutral as investors await the outcome of trade talks. Canadian cabinet minister Dominic LeBlanc is set to meet US Commerce Secretary Howard Lutnick to negotiate potential concessions. LeBlanc expressed optimism in a recent interview, stating, “We are looking, I hope, for an agreement that will put us in a better position than we are right now.”
Outlook
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Key resistance: 1.3900 (psychological level), followed by 1.3955 (August swing high).
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Key support: 1.3800 (round figure), with further downside risk toward 1.3740 (20-day EMA).
Traders are likely to remain cautious in the near term, balancing political uncertainty in the US with potential progress in Canada-US trade negotiations.
