USD/CAD Market Update

USD/CAD Market Update – Wednesday, January 28, 2026

Current Level: Mid-1.35s (24hr range 1.3536–1.3615)

USD/CAD is trading near 1.3550 on Wednesday morning, holding steady in the mid-1.35s following the Bank of Canada's rate decision earlier today. The BoC kept its overnight rate unchanged at 2.25% as expected, delivering a neutral statement that acknowledged ongoing USMCA risks while maintaining a data-dependent stance. The Canadian dollar has shown limited reaction to the decision, with the pair continuing to trade well below the 200-week exponential moving average that it broke through earlier this week. Markets now turn their attention to this afternoon's Federal Reserve policy decision, where rates are expected to remain on hold at 3.75%.

Market Overview:

Risk appetite remains supported this morning, with equity markets opening at record highs as traders weigh strong earnings ahead of this afternoon's FOMC interest rate decision. The S&P 500 crossed 7,000 for the first time ever, reflecting continued optimism about corporate earnings and economic resilience. The U.S. dollar is stronger versus the G10 basket, with the greenback looking to recover steep losses after falling to four-year lows in recent sessions. Global bond yields are mixed, with traders placing their final bets ahead of the Fed decision. Precious metals remain elevated, with gold prices hitting another all-time high of $5,311 per ounce, up 23% year to date. The combination of record equity levels and elevated gold prices reflects a market balancing growth optimism against persistent geopolitical and policy uncertainty.

Bank of Canada Holds at 2.25%, Maintains Cautious Tone:

The Bank of Canada kept its overnight interest rate unchanged at 2.25%, as expected. The decision was neutral but cautious, with policymakers pledging to remain data dependent while acknowledging the ongoing risks to USMCA. The Bank said consumer spending should hold up, with the broader economy expected to grow 1.1% in 2026 and 1.5% in 2027. Inflation is expected to stay near the Bank's 2% target over the forecasted period. All told, the BoC sees growth and inflation balanced, justifying interest rates remaining on hold.

Policymakers warned that elevated uncertainty makes it tough to predict the timing of the next change in interest rates. As such, they pledged that the Bank would respond appropriately should the economy need more or less support. CIBC strategists characterized this as another boring Bank of Canada decision, noting that the Bank is comfortable with where interest rates are but warns of increased uncertainty ahead of USMCA negotiations. The neutral but cautious tone suggests no changes to CIBC forecasts for the policy path ahead.

Federal Reserve Decision Looms This Afternoon:

Markets now turn their attention to this afternoon's Federal Reserve policy decision, where the central bank is widely expected to keep rates unchanged at 3.75%. The decision comes as the U.S. economy continues to show resilience, with equity markets hitting record highs and labor market data remaining solid. Traders will scrutinize Chair Powell's press conference for any hints about the timing and pace of future policy moves, particularly given the solid economic data and persistent inflation readings.

External developments may overshadow incremental policy shifts, including the potential Fed chair nomination and ongoing legal challenges. The combination of strong growth and elevated inflation has reinforced the Fed's patient stance on further rate adjustments. Markets are pricing near-zero probability of a rate cut at today's meeting, with expectations for any further easing pushed well into 2026 as the Fed maintains its cautious approach.

Canadian Data/Outlook:

Canada has no major economic data releases today beyond the Bank of Canada decision, with the loonie taking its cues from broader USD sentiment and positioning ahead of this afternoon's FOMC decision. The BoC's hold at 2.25% was fully priced by markets, with the neutral but cautious tone reflecting policymakers' comfort with current rate levels while acknowledging elevated uncertainty around USMCA negotiations. The Bank's growth forecasts of 1.1% for 2026 and 1.5% for 2027 suggest a gradual improvement in economic conditions, though the pace remains modest. The Canadian dollar is benefiting from elevated gold prices, which hit another all-time high today, though the immediate impact on USD/CAD remains limited as traders await the Fed decision.

Fed Watch:

The Federal Reserve is widely expected to remain on hold at its policy meeting this afternoon, with markets maintaining expectations for no rate cut. The tone of Chair Powell's press conference will be closely scrutinized for any hints about the timing and pace of future policy moves, particularly given the solid economic data and persistent inflation readings. External developments, including the potential Fed chair nomination and ongoing legal challenges, may overshadow incremental policy shifts. Markets are pricing near-zero probability of a rate cut at today's meeting, with any further easing pushed well into 2026 as the Fed maintains its patient stance. The combination of record equity levels and elevated precious metals prices suggests markets are balancing growth optimism against persistent policy uncertainty.

Technical Picture:

Resistance: 1.3615 (24hr high), 1.3728 (former support, now resistance), 1.3750 (medium-term target), 1.3806 (secondary resistance)
Support: 1.3536 (24hr low and near-term support), 1.3500 (psychological support), 1.3450 (extended support level)
Outlook: USD/CAD is trading near 1.3550, continuing to hold below the 200-week exponential moving average for the first time since August 2022. CIBC strategists note that the pair failed to recover after collapsing below this key technical level, suggesting bearish momentum remains intact. For USD buyers, wait for a pullback toward 1.3536 support before entering, with a deeper entry opportunity at 1.3500 if momentum extends. For CAD buyers, sell rallies toward the 1.3615 to 1.3728 resistance zone, where former support levels now act as resistance. CIBC strategists believe that USD/CAD should trade back toward 1.3800 ahead of USMCA negotiations, though they acknowledge betting against technical factors that suggest USD/CAD should continue to bleed lower.

Week Ahead:

This afternoon's Federal Reserve decision represents the key event risk for markets, with Chair Powell's press conference likely to dominate headlines. The tone of forward guidance will be critical, particularly any hints about the pace of future policy adjustments and how policymakers view the evolving trade policy landscape. The potential Fed chair nomination adds significant uncertainty, with implications for both the dollar and cross-border rate differentials. For USD/CAD, the immediate focus is on whether the pair can hold support at 1.3536 or if the recent decline from above 1.3800 signals a deeper correction toward the 1.3500 level.

Other Notes:

• Gold Hits Record High: Gold prices hit another all-time high of $5,311 per ounce, up 23% year to date. The parabolic move in precious metals reflects a combination of factors including currency debasement fears, geopolitical uncertainty, and concerns about fiscal sustainability in major economies. CIBC strategists warn that the charts look unreal and are frightening given the implications, cautioning against putting on swing positions at these levels as the move could reverse quickly.
• S&P 500 Crosses 7,000: The S&P 500 crossed 7,000 for the first time ever, reflecting continued optimism about corporate earnings and economic resilience. The record high comes as equity markets weigh strong earnings reports against elevated policy uncertainty, with traders positioning ahead of this afternoon's Fed decision.
• USD/CAD Technical Break: USD/CAD is trading below the 200-week exponential moving average for the first time since August 2022, confirming bearish momentum remains intact. CIBC strategists note that the pair has failed to recover after collapsing below this key technical level, though they believe USD/CAD should trade back toward 1.3800 ahead of USMCA negotiations. The divergence between technical factors suggesting further CAD strength and fundamental views pointing to eventual USD recovery creates a challenging trading environment.
• Canadian Dollar Positioning: Speculative positioning against the Canadian dollar has significantly normalized from the deep net short levels seen throughout late 2024 and 2025. However, the Canadian dollar is noticeably lagging its peers to start 2026, flat year to date while the Australian dollar has gained 3.1% and the New Zealand dollar 3.0%, highlighting a lack of specific demand for the loonie despite the recent technical breakdown in USD/CAD.

Market Mood:

RSI Scale: <30 Oversold | 30-40 Risk-Off | 40-60 Neutral | 60-70 Risk-On | >70 Overbought

This commentary is provided for informational purposes only and should not be construed as investment, legal, or tax advice. Past performance is not indicative of future results. Please consult with qualified professionals before making any financial decisions. Richardson International Currency Exchange Inc. DBA Vantry Capital.