Where we are: USD/CAD is currently trading at 1.3630, marginally lower on the day (-0.02%), holding a tight intraday range of 1.3620-1.3643. The pair continues to consolidate around this level, struggling to break free from its recent sideways trend. This comes after a mixed performance in the prior NY session and leaves the pair near the lower end of yesterday’s range.
What’s driving it: The Canadian Dollar is caught between conflicting forces. The BoC’s easing bias, as reiterated by Macklem’s comments on tariff uncertainty and softer growth path at the last meeting, continues to weigh on the Loonie. This is compounded by the significant drop in WTI crude (-5.86% to $90.21), a key driver for CAD. However, a broader risk-on sentiment, reflected in rallying equity futures (S&P 500 futures +0.30%), is providing some offsetting support for the CAD.
- The BoC held rates at 2.75% at their last meeting, citing tariff uncertainty as a concern.
- WTI crude’s -5.86% plunge is a major headwind for the CAD, given its commodity-currency status.
- CFTC data shows net non-commercial CAD positioning is modestly short at -38,476 contracts, but rising weekly with a 79th percentile ranking, suggesting short covering risk if CAD catches a bid.
NY session focus: The focus for the NY session will be on the 08:30 ET US Unemployment Claims print, which could inject volatility into USD crosses. Watch for a break above 1.3643 to potentially target 1.3670 or a break below 1.3620 to test 1.3590. The spread between US and CA 10-year yields remains wide at +84bp, favouring USD strength but risk sentiment is proving a potent counterweight. The trade that’s working is fading rallies above 1.3640. The trade that is at risk is shorting CAD on crude weakness, given potential for a risk-on squeeze if equity markets continue their ascent. The pain trade is a sustained rally in oil prices, driving USD/CAD sharply lower.