USD/CAD Slides Amid Trump’s Criticism of Fed Chair Powell Weighing on US Dollar
By Vishal Chaturvedi | June 26, 2025
The Canadian Dollar (CAD) showed modest gains against the US Dollar (USD) on Thursday as political pressure mounted on the Federal Reserve (Fed), following sharp criticism from US President Donald Trump directed at Fed Chair Jerome Powell. The remarks sparked renewed fears of political interference in US monetary policy, undermining confidence in the Fed’s independence and exerting downward pressure on the US Dollar.
USD/CAD Trends Lower on Fed Concerns
At the time of reporting, the USD/CAD currency pair traded near 1.3630, reflecting a decline of approximately 0.70% on the day. The pair remained confined within a descending channel, underscoring a bearish technical outlook. Immediate support was identified near the lower Bollinger Band around 1.3587. The downward momentum in USD/CAD emerged despite earlier rangebound trading throughout the week. This stability had been challenged by the Canadian Dollar’s limited upside potential amid falling oil prices, which traditionally influence the commodity-linked Loonie. The easing of geopolitical tensions contributed to depressed energy prices, limiting the Canadian currency’s strength.
US Dollar Index Near Lowest Level in Almost Three Years
The weakness in the US Dollar extended across the board, with the US Dollar Index (DXY)—which measures the Greenback’s value against a basket of six major currencies—hovering near 97.22, its lowest mark in nearly three years. Mixed US economic data released on Thursday added complexity to market sentiment, restricting any potential rebound in the US Dollar.
Specifically, durable goods orders surged in May, signaling strength in the manufacturing sector. However, this positive development was offset by news of a deeper-than-expected economic contraction of 0.5% in the first quarter of 2025, compared with an earlier estimate of a 0.2% decline. Additionally, initial jobless claims dropped by 9,000 to 236,000 for the week ending June 21, falling short of expectations. While these numbers indicated some resilience, claims remained elevated relative to the yearly average, reflecting slowing labor market momentum.
Technical Outlook: Bearish Bias Holds
Technically, the USD/CAD pair remains trapped within a clearly defined descending channel. The recent rejection near the upper boundary of this channel, drawn from the highs of March and May, confirmed ongoing bearish dynamics.
The tightening Bollinger Bands suggest the pair may be poised for a significant move soon. Key support lies around 1.3587 at the lower band, and a decisive break under this level could open the door for a test of the psychological 1.3500 mark. Conversely, any attempt to break above 1.3680 is necessary to challenge resistance near 1.3778 and the top of the descending channel.
Momentum indicators reinforce a cautious tone. The Relative Strength Index (RSI) remains subdued near 38, comfortably below the neutral 50 level, signifying prevailing bearish momentum. The Moving Average Convergence Divergence (MACD) histogram indicates early signs of convergence, with the MACD line attempting to cross above the signal line—potentially a preliminary bullish signal; however, this has yet to be confirmed.
Market participants and technical analysts agree that substantial bull strength will require a clean breakout above the descending channel. Until such an event occurs, the path of least resistance for USD/CAD appears downward.
Impact of Political Risks on Fed Independence
US President Donald Trump’s pointed remarks against Fed Chair Jerome Powell have rattled markets by fueling concerns over political interference in the US central bank’s policymaking. Speculation that the President may consider replacing Powell amplified uncertainty regarding the Fed’s future independence. This, combined with mixed economic data, has created an environment of caution, discouraging confidence in the US Dollar and indirectly supporting commodity-linked currencies like the Canadian Dollar, despite headwinds from energy markets.
Summary
In summary, the USD/CAD exchange rate is in retreat amid sustained US Dollar weakness influenced by political unease surrounding the Federal Reserve’s autonomy and mixed signals from the US economy. The Canadian Dollar benefits modestly from the Greenback’s struggles, even as softening oil prices tamp down its gains. From a technical perspective, the pair is entrenched in a descending channel with bearish momentum prevailing until a breakout signals otherwise.
Market participants should watch key support and resistance levels closely as tightening price bands hint at a sizable move in the near term. The evolving political developments and upcoming US economic data releases will be critical in shaping the outlook for the USD/CAD pair and broader foreign exchange markets.
This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research or consult a financial professional before making investment decisions.