Where we are: USDCAD is currently trading around 1.3790, consolidating gains made in the overnight session. The pair has been oscillating in a narrow range between 1.3770 and 1.3810, slightly above yesterday’s NY close. Technically, USDCAD is testing resistance at 1.3800, with support holding near 1.3750.
What’s driving it: The Canadian dollar continues to trade with a soft undertone given the Bank of Canada’s lingering easing bias, despite headline CPI remaining above target at 7.1%. Macklem’s recent remarks cited tariff uncertainty and a softer growth path as reasons for holding rates steady at 2.75% on April 16th, and the market is interpreting this as a signal that further easing remains a possibility, data-dependent as it may be. This dovish stance is being contrasted with the dollar’s resilience, fueled by modestly higher US real rates despite a largely unchanged 2s10s spread.
- The Bank of Canada held rates at 2.75% on April 16th, citing tariff uncertainty and softer growth.
- Canada’s CPI YoY came in at 7.1%, slightly above the prior 7%, but not enough to shift BoC expectations materially.
- Speculative positioning remains modestly short CAD (-16,242 contracts), leaving room for further downside if the BoC narrative solidifies.
NY session focus: The key event for the NY session is the release of the FOMC Meeting Minutes at 14:00 ET. Traders will be scrutinizing the minutes for any hints regarding the Fed’s rate path. For USDCAD, a hawkish tilt from the Fed could propel the pair toward 1.3850, while a dovish read could see a test of support near 1.3750. The trade that’s working is short CAD vs. long USD, but is at risk of a reversal if the Minutes reveal concerns about the US growth outlook. The pain trade is a sustained break below 1.3700.