The latest political developments certainly add a lot of intrigue to the USD/CAD chart to start the new year. The pair approached 1.4500, but is now finally retreating. Is this consistent with the potential for a technical pullback as we previously saw in 2016 and 2020?

The pair even extended above 1.4600 during those two previous times, so a line in the sand can also be drawn to be anywhere between 1.4500 and 1.4660 or thereabouts. But perhaps the 1.4500 mark offers more of a psychological barrier, as traders like their big round figures.

Either way, the loonie is up this week with USD/CAD down 0.4% today to 1.4390. Trudeau appears ready to resign as prime minister. Some background on this:

Trudeau’s Liberal Party is struggling for public support and it seems we have finally received the last straw. As he steps down, the Liberal Party is likely to remain at the helm as they search for an interim successor.

However, any leader who remains in power will require a vote of confidence from MPs. If not, a general election will be called. And anyway, it looks like that’s where we’re going because it’s going to have to happen before October of this year.

As things stand, Pierre Poilievre’s Conservative Party has a chance to take over and govern in Canada. And there are certain quarters in the market that believe he is more pragmatic about drawing lines on the economic and trade front than Trudeau.

The fact that Trump was elected president of the United States is a problem for Trudeau, because he does not have the best relationship with tariff list. And that could put Canada in the crosshairs for a more challenging economic landscape this year.

But if Poilievre, while quite outspoken himself, manages to forge a better relationship with Trump, then that might be seen as a positive for the madman. I mean, the line of thinking in the markets is that could the outlook be any worse than it is now under Trudeau?

Trudeau avoided any real confrontation with the US on trade, while insisting on protecting Canadian economic interests throughout the NAFTA/USMCA proposal. Then there’s the case that he’s aligning himself more with the likes of Mexico and the EU firing back at Trump on tariffs.

So while Poilievre may also have a populist approach, he may just be one who leans more towards securing Canada’s economic interests rather than focusing on aligning with other trade allies. And that could benefit the economy if it is able to get on Trump’s good side.

In addition, there is a chance that Poilievre will take a strong stand against Trump and fight back. But for now, I guess traders are taking things in pieces.

At the end of the day, it will be a case of waiting and seeing what happens. The first step in all of this, of course, requires Trudeau to resign, so we’ll have to wait first.