USD/CAD Market Update

USD/CAD Market Update – Thursday, January 29, 2026

Current Level: Mid-1.35s (24hr range 1.3492–1.3563)

USD/CAD is trading near 1.3567 on Thursday morning, extending its decline to fresh multi-year lows as broad U.S. dollar weakness continues to dominate currency markets. The Federal Reserve held interest rates steady at 3.5% to 3.75% on Wednesday as expected, but the policy statement took a more hawkish tone by upgrading the economic growth assessment and noting that unemployment has shown signs of stabilization. The Canadian dollar is benefiting from elevated oil prices, which have climbed above $70 per barrel for the first time since September amid rising tensions between the U.S. and Iran, though the loonie's gains remain modest compared to other commodity currencies.

Market Overview:

Risk appetite is mixed this morning, with equity markets opening mostly flat as traders weigh ongoing geopolitical tensions against corporate earnings. The U.S. dollar continues to struggle, with the greenback trading at four-year lows against the G10 basket despite the Federal Reserve's hawkish hold on Wednesday. Global bond yields are mixed with no major moves worth reporting. Precious metals continue their surge, with gold and silver hitting new record highs as currency debasement concerns accelerate. The combination of dollar weakness and elevated commodity prices is providing support for resource-linked currencies, though the Canadian dollar remains an underperformer relative to peers.

Federal Reserve Delivers Hawkish Hold, Dollar Weakness Persists:

The Federal Reserve held interest rates steady at 3.5% to 3.75% on Wednesday in a 10 to 2 vote, marking the first pause since July. The decision was punctuated by dissent from Governors Waller and Miran, who both favored a 25 basis point cut. The policy statement took a more hawkish tone, upgrading economic growth to a solid pace and noting that the unemployment rate has shown some signs of stabilization. This signals that rates will likely remain on hold for longer.

Despite the hawkish messaging, the U.S. dollar failed to find support and continued its slide to four-year lows. Treasury Secretary Scott Bessent attempted to steady markets on Wednesday by reaffirming the U.S. commitment to a strong dollar, explaining that a robust greenback is the natural result of sound economic fundamentals. He also shut down rumors of market manipulation, stating there is no U.S. intervention to sell the dollar against the yen. While his reassuring tone sparked an initial rebound, the dollar's gains began to taper off by Thursday morning as negative sentiment around the greenback persists and the risk of a sell-off breakout remains high.

Iran Tensions Push Oil Above $70, Adding Risk Premium:

Geopolitics remain in focus as rising tensions between the U.S. and Iran pushed Brent crude oil prices to hit $70 per barrel for the first time since September. President Trump has warned Iran to agree to a nuclear deal or face military action, which has raised concerns about possible disruptions to oil supplies coming from the Middle East. A large U.S. armada of ships and aircraft carriers, including the USS Lincoln, has arrived within striking distance of Iran, suggesting a conflict could be imminent.

The possibility of U.S. military action against Iran has shifted global markets, added a risk premium to oil prices, and forced traders to hedge further upside. Investors are bracing for what could be an imminent U.S. attack against Iran. In terms of the market fallout, the only thing that is clear would be a knee-jerk reaction higher in oil prices. The elevated oil price environment is providing some support for the Canadian dollar, though the impact has been limited as broader dollar weakness and technical factors dominate the pair's direction.

Precious Metals Surge to Record Highs:

Precious metals continue to surge, with gold and silver prices hitting new record highs as the great debasement trade accelerates. Gold has cleared $5,000 per ounce to reach new all-time highs, while silver is starting to run out of technical levels on the topside. The next key area for silver sits at $156.16, which represents the 361.8% Fibonacci level of the two-decade base from 2010 to 2025. CIBC strategists warn to be careful going long or short at these levels, as the charts look unreal and are frightening given the implications. The extreme strength in precious metals reflects deep market anxiety about currency debasement, geopolitical uncertainty, and concerns about fiscal sustainability in major economies.

Bank of Canada Maintains Neutral Stance Amid Uncertainty:

Bank of Canada Governor Tiff Macklem has been addressing the turmoil in U.S. trade policy, though his commentary has drawn attention for closely tracking Prime Minister Mark Carney's Davos framing. This stands in contrast to Federal Reserve Chair Jerome Powell, who has effectively built a moat around the Fed's independence by advising his successor to stay out of elected politics. The uncertainty created by U.S. tariff threats is real and showing up in the data. The Bank frames Canada's sluggish outlook primarily as a byproduct of Washington's tariff flip-flops, though this risks eroding the perception of neutrality that is essential to monetary credibility.

The Bank's own numbers are cool to the touch. Growth is projected at 1.1% this year and 1.5% in 2027, and officials concede that forecast risks are larger than usual. That is hardly a comfort when the trade backdrop is shifting, CUSMA's review looms, and businesses are still rerouting supply chains. Elevated uncertainty is the Bank's phrase, and it cuts both ways for policy. After snapping back toward 1.36, the USD/CAD has pushed into a new 15-month low at 1.3510, and with realized and implied volatility picking up around familiar resistance, the loonie's upside looks dependent on a clear sell-off in the U.S. dollar.

Canadian Data/Outlook:

Canada has no major economic data releases today, with the loonie taking its cues from broader USD sentiment and elevated commodity prices. The Canadian dollar is benefiting from oil prices climbing above $70 per barrel amid Iran tensions, though the immediate impact remains limited as technical factors and dollar weakness dominate the pair's direction. The Bank of Canada'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 and forecast risks are larger than usual given trade policy uncertainty.

Fed Watch:

The Federal Reserve held rates steady at 3.5% to 3.75% on Wednesday as expected, with the policy statement taking a more hawkish tone by upgrading economic growth to a solid pace and noting that unemployment has shown signs of stabilization. The decision featured dissent from Governors Waller and Miran, who both favored a 25 basis point cut. Waller's shift is particularly critical for markets given his status as a Fed chair contender, raising questions about whether the move was driven by evolving economic data or shifting political considerations. Markets are pricing near-zero probability of a rate cut at the next meeting, with any further easing pushed well into 2026 as the Fed maintains its cautious approach. The hawkish hold signals that rates will likely remain on hold for longer, though the dollar's continued weakness suggests markets are focused on other factors beyond Fed policy.

Technical Picture:

Resistance: 1.3563 (24hr high), 1.3615 (near-term resistance), 1.3728 (former support, now resistance), 1.3750 (medium-term target)
Support: 1.3510 (15-month low), 1.3492 (24hr low and near-term support), 1.3450 (extended support level), 1.3420 (next support level)
Outlook: USD/CAD is trading near 1.3567, continuing to hold at multi-year lows as bearish momentum remains intact. CIBC strategists note that the pair has failed to recover after collapsing below the 200-week exponential moving average earlier this week, suggesting bearish momentum remains intact. For USD buyers, wait for a pullback toward 1.3492 support before entering, with a deeper entry opportunity at 1.3450 if momentum extends. For CAD buyers, sell rallies toward the 1.3563 to 1.3615 resistance zone. The next levels of support sit at 1.3420 followed by 1.3177. 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:

The focus this week shifts to Friday's Canadian GDP data for November, which will provide insight into whether the economy has stabilized following October's contraction. The data is unlikely to shift expectations for Bank of Canada policy, with rates expected to remain on hold at 2.25% through 2026. For USD/CAD, the immediate focus is on whether the pair can hold support at 1.3492 or if the recent decline signals a deeper correction toward the 1.3420 level. The combination of elevated geopolitical tensions, record-high precious metals prices, and persistent dollar weakness creates a challenging environment for forecasting near-term direction.

Other Notes:

• EUR/USD Momentum: The euro has extended its gains against the U.S. dollar this morning after a brief pullback from four-year highs. The dollar's fleeting post-Fed bounce only underscored how bearish the underlying momentum has become. The path toward $1.40 in EUR/USD is becoming increasingly plausible, even in the absence of strong domestic catalysts for the euro. Sterling is weaker against every G10 currency except the U.S. and Canadian dollars, though GBP/EUR remains steady around 1.15.
• Equity Markets Mixed on Earnings: Equity markets are mixed as strong earnings from Meta, up 8%, are offset by a soft outlook from Microsoft, down 10%. The S&P 500 continues to trade near record highs despite the mixed earnings picture, reflecting continued optimism about corporate earnings and economic resilience.
• 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.
• GBP/EUR Stability: As one of the more stable and less volatile G10 pairs, GBP/EUR has seen orderly price action despite the turbulence elsewhere. The base case remains mildly bearish over the coming months, though there is scope for upside surprises. Valuation signals point to GBP/EUR being broadly fairly priced, but the Bank of England presents a clear risk where the bar for dovish surprises is low.

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.