Where we are: USDCAD trades near 1.3725, consolidating gains after an overnight push higher. The pair traded in a tight overnight range of 1.3700-1.3730. This level is above Friday’s NY close, reflecting the underlying bid driven by rising US yields. Resistance is eyed near the recent high of 1.3750, with support around 1.3680.
What’s driving it: The Canadian Dollar is facing headwinds as US Treasury yields extend their ascent, overshadowing domestic considerations. The Bank of Canada’s easing bias, reiterated by Governor Macklem’s cautious tone on tariff uncertainty and slower growth, keeps rate-cut expectations alive despite sticky headline CPI at 7.1%. This morning’s Canadian CPI data (08:30 ET) will be crucial in shaping near-term expectations, but the market’s primary focus is on the broader USD strength and US yields.
- US 2Y yield at 4.09%, up 9bp on Friday.
- Macklem cited tariff uncertainty in April.
- Speculators remain modestly short CAD (-16,242 contracts), leaving room for further downside on negative data surprises.
NY session focus: This morning’s Canadian CPI data (08:30 ET) will be the immediate catalyst, with any downside surprise likely to exacerbate CAD weakness. Focus then shifts to US Pending Home Sales at 10:00 ET. Key levels to watch are 1.3750 (resistance) and 1.3680 (support). The market is currently rewarding USD strength, particularly against commodity currencies. The risk to this trade is a significantly weaker-than-expected US macro print, which could trigger a rapid reversal in US yields and a CAD rally. The pain trade is a surprisingly strong Canadian CPI print that forces a BoC hawkish pivot.