Insights 
VT 
April’s unexpected increase in CPI data has eased expectations for a June rate cut by the Bank of Canada, impacting US/Canada interest rate spreads. The narrower spreads have provided a boost for the Canadian dollar against a generally weaker US dollar, with an estimated fair value for the spot rate at 1.3868.
The narrowing spreads may encourage USD selling interest near the 1.40 area, while Finance Minister Champagne and BoC Governor Macklem are scheduled to speak as the G7 meeting concludes. The spot rate has encountered strong resistance above 1.40 in May, with potential for further declines towards the 1.3750/1.38 range if support at 1.3895/00 is breached.
Bearish Momentum and Resistance Levels
Bearish momentum oscillators suggest a decline in the USD, with initial resistance at 1.3910/15 and strong resistance at 1.4025, which aligns with the 200-day moving average and recent highs. This information does not constitute a recommendation for trading decisions and should be independently verified for accuracy.
The recent uptick in April’s consumer price index data came as a bit of a jolt and has nudged back the likelihood of a rate cut in June by the Bank of Canada. What that has done, in effect, is shift the relative position of Canadian and US interest rates. This reshaping of expectations closed the gap between the two, helping the Canadian dollar climb slightly, especially as the US dollar struggled more broadly.
Currently, we’re looking at an estimated fair value for USD/CAD near 1.3868, which acts as a useful anchor point in our models. It gives us a benchmark when assessing whether spot is trading at a premium or discount, and helps us gauge if sentiment is running too far in any direction.
In the near term, traders should take note that there is a reasonable chance of increased selling in USD as the pair approaches the 1.40 level. That’s been a fairly well-tested zone throughout May—and it’s acted like a ceiling more than once. The idea here is that a move through it would need a firmer catalyst, and without that, any approach towards 1.40 could bring in offers.
Support Levels and Policy Speeches
Support, meanwhile, looks firmer around the 1.3895/1.3900 region. If this area fails to hold, it would open up the path for a move into the 1.3750–1.3800 range, particularly given the current signs from momentum indicators, which continue to lean bearish. Those technicals, especially the oscillators we track, are pointing to a possible weakening in the USD leg of the pair in the short term.
Speeches from senior policymakers—including recent remarks expected from Champagne and Macklem—should be watched carefully. While their comments will likely aim to reassure and reiterate known positions, there’s always the chance for shifts in tone or forward guidance. These statements, timed around the end of the G7 meeting, tend to receive heavier scrutiny and can sometimes nudge market psychology if not the baseline rates outlook straight away.
Technically, keep a close eye on 1.3910/15 for immediate resistance, with 1.4025 as a heavier zone of supply. That latter level isn’t just a round number—it also coincides with the 200-day moving average and previous highs, which adds weight. Any failure to get past 1.4025 convincingly would reinforce the broader range we seem to be working with for now.
From our perspective, we’re watching to see how consistently CAD continues to find buyers near the lower bound of this range. A sustained break below 1.3895, followed by follow-through selling, may suggest that USD positioning had run ahead of itself.
