The Canadian Dollar remains relatively unchanged, with USD/CAD stabilising around the upper 1.35 zone. US/Canada trade discussions are ongoing, with expectations for an agreement this month.

The CAD is currently facing challenges due to weaker risk sentiment, leading to a slightly higher equilibrium estimate for USD/CAD at 1.3560. Canada’s final June S&P Global Services and Composite PMIs are set to be released soon.

Broader Downtrend

A broader downtrend in USD remains intact, with limited potential for the USD to rise beyond the low/mid-1.36s in the near term. Support for USD/CAD is noted around the 1.3540/50 range.

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Canadian Dollar And Trade Negotiations

With USD/CAD hovering near the upper 1.35 region, there’s a holding pattern in motion that may not last much longer. The ongoing trade negotiations between the US and Canada suggest a higher likelihood of a formal arrangement being settled soon. Should a deal materialise within the month, it may cause some fluctuation in CAD, though that remains dependent on finer policy details, rather than broad headlines.

What we’re looking at now is a Canadian Dollar that remains soft on the back of muted global risk appetite. This matters, because currencies linked more closely to commodities and growth – like the CAD – tend to underperform when market sentiment cools. This mood has nudged the reference point for USD/CAD up slightly, around 1.3560, as a fairer reflection of market expectations, given present external pressures.

The release of Canada’s final June S&P Global Services and Composite PMIs adds another layer. Should these data disappoint in both breadth and strength, it’s reasonable to expect CAD pressure to build modestly. Traders will want to monitor these prints for potential triggers, especially if survey-based data points to softness in consumer services or a downturn in business investment sentiment.

Meanwhile, the broader directional pressure on the USD – still leaning downward – acts as a counterweight. This overarching trend, rooted in market positioning and medium-term rate path assumptions, serves to anchor any sustained advance in USD/CAD. Judging by recent price behaviour and positioning, the currency pair is struggling to break above the low-to-mid 1.36 area with any conviction.

However, the 1.3540/50 range has shown to provide some price support. That level could hold unless there’s a new round of strong US data or a meaningful deterioration in Canadian metrics. With this in mind, tactical positioning should be approached with a sense of patience and short-term bias.

From our perspective, the interaction between macro data on both sides remains pivotal. Favouring concise setups with limited exposure to outsized moves – particularly around data releases or policy headlines – could prove more constructive in this period. Traders might consider how risks around sentiment shifts, commodity movement, and policy hints (both fiscal and monetary) in North America may provoke sharper intraday action, even if broader trends remain subdued.

As always, careful scenario planning remains pertinent at this point.

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