Insights 
VT 
The Canadian Dollar is currently showing modest weakness, with losses potentially stabilising above 1.37. However, the USD continues to trade above an estimated fair value of 1.3630, suggesting that gains may extend further.
The Bank of Canada’s recent communications reveal concerns over persistent inflation and uncertainty regarding tariffs. Despite a slowing domestic labour market, the Bank is not rushing to cut rates, similar to the Federal Reserve.
Technical Outlook
USD gains reached the low 1.37s overnight, improving the short-term technical outlook for the currency. Resistance is expected at 1.3745/50, with a break above the mid 1.36s suggesting potential further gains into next week.
A firm weekly close could enhance near-term positive momentum, with the USD potentially reaching between 1.3775 and 1.3825. Current support levels are noted at 1.3690 and 1.3630.
It is important to conduct thorough research before making financial decisions, and remember that investing in open markets carries risks, and total loss of capital is possible.
We are currently observing a sustained upward push in USD/CAD, with price action suggesting that recent strength in the US dollar could continue to carry it above current levels. The modest softness in the Canadian Dollar, in combination with USD trading above perceived fair value, means we might be looking at more room for upside in the immediate term. Last week’s move into the low 1.37s has lent support to a slightly firmer technical stance, and the pair now seems to be building a base for further moves — particularly if it holds convincingly above support at 1.3690.
Monetary Policy and Market Implications
From a monetary standpoint, the Bank of Canada’s latest messaging points to stubborn inflationary elements and exterior uncertainty tied to global tariff measures. Despite signs that the local employment backdrop has lost some firmness, policymakers are not signalling any urgency to shift their current rate path. This mirrors the Fed’s more cautious approach in the US, where rate cuts are being delayed until clearer disinflation trends appear.
Wilkins’ tone in recent public remarks indicates that policy-makers are not yet seeing enough evidence to justify loosening monetary conditions. This introduces short-term support for the Canadian Dollar, but not enough to reverse broader trends, particularly if US data remain solid and capital sticks in the dollar’s favour.
Given where resistance is currently resting around 1.3745 to 1.3750, a close at or beyond this point on the weekly time frame could provide the spark needed for a test towards 1.3780 or even creeping towards 1.3825, especially in thin liquidity periods or moments of heightened volatility. However, any failure to convincingly break through 1.3750 this week should be observed carefully, as it could present a rotation back lower towards 1.3690 or even 1.3630.
For those of us trading derivatives tied to USD/CAD, the reaction around the upper range should be monitored very closely. We’re watching for any divergence between price momentum and macro commentary, particularly fiscal-led volatility linked to cross-border trade measures. This goes beyond traditional inflation measures and enters more technical territory — where market sensitivity can spike around scheduled data points and unscheduled comments from committee members.
Markets are digesting signals in real-time. If inflation surprises to the downside or labour data underperforms, that could weigh on the USD. But for now, the pair is finding support in both positional and structural tailwinds. Those engaged should review trailing stops and structure exposure with these resistance zones in focus. While chasing the upper band carries risk given recent volatility compression, a decisive break above followed by confirmation on strong volume could justify reopening directional strategies.
As always, detailed analysis of both macro signals and price structure is necessary. Movement through predetermined levels often happens during release windows, so setups that incorporate those risks will likely fare better.
