Where we are: USD/CAD is currently trading at 1.3676, up 0.35% on the session, having traded in a range of 1.3613 to 1.3680. The pair is edging towards the upper end of that range, and firmly above yesterday’s NY close, despite a surge in WTI crude prices. The technical picture suggests resistance around 1.3700 with support near the overnight low.
What’s driving it: Despite a significant surge in WTI crude oil, up 3.43% to $99.78, the Canadian dollar has failed to capitalize. The BoC’s recent hold at 2.75% with Macklem citing tariff uncertainty and softer growth path continues to weigh, keeping easing bias alive and limiting CAD upside. The yield divergence is also working against the Loonie, with the US-CA 10-year spread widening to +83bp.
- Canada’s 2s10s curve is at +66bp, but US curve steepening is drawing investment away from Canada
- CFTC data shows net non-commercial CAD positioning is modestly short at -58,834 contracts, suggesting room for further downside.
- Domestic CPI at 7% isn’t providing enough lift to offset broader sentiment.
NY session focus: Focus shifts to the US session, with the 10:00 ET release of CB Consumer Confidence being the key event. A weaker-than-expected print could provide a temporary reprieve for the Loonie, but broader dollar strength and BoC’s dovish stance likely to cap gains. Key levels to watch are 1.3700 as resistance and 1.3600 as support. The prevailing trade favors fading CAD rallies. The pain trade is a significant WTI breakout above $102 coupled with hawkish BoC rhetoric unexpectedly surfacing.