USD/CAD Market Update

USD/CAD Market Update – Wednesday, February 04, 2026

Current Level: Mid-1.36s (24hr range 1.3629–1.3680)

USD/CAD is trading near 1.3668 on Wednesday morning, holding steady in the mid-1.36s as the pair consolidates following yesterday's rebound from multi-month lows. The Canadian dollar remains under pressure despite elevated commodity prices, as the U.S. dollar attempts to stabilize after falling to four-year lows earlier this week. Markets are focused on this afternoon's ADP employment report, which is expected to show 48,000 private sector jobs added in January, providing a preview of Friday's official nonfarm payrolls data that has been delayed by the partial government shutdown.

Market Overview:

Risk appetite is mixed this morning, with equity futures pointing to a modestly higher open following Anthropic's introduction of an AI automation platform, though the announcement has sparked selling pressure in software, financial services, and asset management sectors. The U.S. dollar is marginally higher versus the G10 basket, with no major moves worth reporting. Global bond yields are mixed with limited market reaction to overnight developments. Precious metals have recovered above key psychological levels, with gold retaking $5,000 per ounce following Friday's sharp decline driven by the liquidation of crowded leveraged positions. The combination of stabilizing dollar sentiment and recovering commodity prices creates a mixed backdrop for the Canadian dollar.

ADP Employment Report Expected to Show Cooling Labor Market:

This morning's U.S. ADP employment report is expected to show 48,000 private sector jobs added in January, down from December's revised figure. The report is expected to reveal continued sectoral divergence in the U.S. labor market, with manufacturing shedding jobs alongside weakness in professional and business services. In contrast, education and health services, which have been the primary driver of payroll gains over the past year, are expected to show robust hiring. While ADP data should be interpreted cautiously given its imperfect alignment with official figures, these trends are consistent with recent industry-level patterns observed in nonfarm payrolls. Combined with the stabilization of initial jobless claims at low levels throughout January, RBC expects the delayed NFP print to show that 63,000 jobs were added to the U.S. economy last month, reflecting modest but stable labor market conditions despite underlying sectoral weakness in manufacturing and business services.

U.S. Government Shutdown Ends, Clearing Path for Data Releases:

The U.S. House of Representatives narrowly voted 217 to 214 to end the partial government shutdown, restoring funding to affected agencies. The vote sets up contentious negotiations over Immigration and Customs Enforcement funding, which is central to the administration's deportation efforts. Following the deaths of Americans Renée Nicole Good and Alex Pretti during law enforcement actions in Minneapolis, Democrats are pushing reforms including mandatory body cameras, officer identification requirements, and judicial warrants for enforcement activities. The resolution of the shutdown removes uncertainty around the timing of key economic data releases, though the Bureau of Labor Statistics has confirmed that the January jobs report will still be delayed beyond its normal schedule.

Aviation Dispute Adds to U.S.-Canada Trade Tensions:

Canada is working to resolve an aviation dispute with the U.S. after the Federal Aviation Administration moved to clear pending approvals for American Gulfstream aircraft. President Trump had threatened 50% tariffs and decertification of Canadian-made planes unless the issue was immediately corrected. Bombardier acknowledged Trump's comments and confirmed it is coordinating with Canadian officials. The dispute adds to recent U.S.-Canada frictions and risks disrupting regional aviation operations that support thousands of jobs across North America. Markets have shown limited reaction to the announcement, with investors viewing this as another example of tariff rhetoric rather than imminent policy action.

Precious Metals Recover After Historic Selloff:

Precious metals are extending their recovery following Friday's historic crash, with gold retaking the $5,000 per ounce level. The recovery follows the liquidation of crowded leveraged positions that drove sharp declines after President Trump's nomination of Kevin Warsh as the next Federal Reserve Chair. Silver is holding above key support levels, with the next key resistance sitting at $5,140 per ounce for gold, representing the 61.8% retracement of the drawdown. A break above this level would open the path to all-time highs. The stabilization at technical support levels suggests Friday's move was a sharp correction rather than a trend change, though analysts caution that the charts remain extended and frightening given the implications.

Canadian Data/Outlook:

Canada has no major economic data releases today, with the main event of the week being Friday's employment report for January. Consensus expectations point to only modest headline changes with the unemployment rate hovering near recent readings around 6.8%. A softer print would likely pressure the Canadian dollar, whereas any upside surprise could temper USD/CAD's recent bid. November GDP was flat after a decline in October, underscoring softer momentum into year end. The jobless rate being closer to 7% than 6% is indicative of slack in the Canadian economy, which should keep inflationary pressures in check and justify a Bank of Canada hold at current policy settings. RBC forecasts the BoC overnight rate to remain at 2.25% through all of 2026.

Fed Watch:

The Federal Reserve is expected to remain on hold at its next policy meeting on March 18, with markets pricing near-zero probability of a rate cut in the near term. The nomination of Kevin Warsh as the next Federal Reserve Chair has provided clarity on leadership succession, with his hawkish historical record suggesting policy will remain restrictive. Warsh backed higher rates on the eve of the Lehman Brothers collapse and consistently argued that the Fed's market interventions have gone too far, cementing his inflation-first credentials. His primary challenge will be expanding the economy amid an AI boom without reigniting inflation. RBC forecasts the Fed funds rate upper bound to remain at 3.75% through the end of 2026. The delay of the January jobs report due to the government shutdown removes a key data point that would have informed near-term policy expectations, though the ADP report today will provide some insight into labor market conditions.

Technical Picture:

Resistance: 1.3680 (24hr high), 1.3728 (61.8% Fibonacci retracement level), 1.3806 (secondary resistance)
Support: 1.3626 (must hold to maintain corrective scenario), 1.3578 (deeper support), 1.3494 (76.4% retracement level), 1.3482 (key support level)
Outlook: USD/CAD is trading in the mid-1.36s as price struggles to break the 61.8% Fibonacci level of the downtrend. A bullish reversal pattern formed Friday at 1.3494, with Monday's close above 1.3675 resistance confirming the reversal and setting up a corrective bounce toward 1.3728 and 1.3806. Key support sits at 1.3626, which must hold to maintain the corrective scenario. Reversal would be invalidated if the pair closes below 1.3482, which would shift focus to the September 2024 low at 1.3420. RBC's strategic view remains unchanged, with rallies viewed as selling opportunities and 1.3932 representing strong resistance marking the likely range top. The 1 to 3 month technical target of 1.3550 was achieved last week.

Week Ahead:

The week ahead features a busy calendar with central bank decisions from the ECB and Bank of England on Thursday, both expected to hold policy unchanged. Friday's Canadian employment report takes on added importance given the delay of U.S. jobs data, as it will provide the only fresh labor market insight from North America this week. The ADP report and ISM Services data on Wednesday will offer some clues about U.S. economic momentum, though the absence of the official payrolls report leaves a significant information gap. For USD/CAD, the immediate question is whether the pair can maintain momentum above 1.3626 or if the recent rally from oversold conditions will stall at technical resistance near 1.3728.

Other Notes:

• Software Stocks Under Pressure: Equity markets show growing divergence as software companies face selling pressure after Anthropic released a new AI tool that can automate legal work such as contract and briefings for a fraction of the price of traditional subscription models. This has led to a destruction in valuation for major players, all of which are trading at 52-week lows. The collapse in software stocks has weighed heavily on private equity, as many firms are highly levered with big portfolio positions.
• Canadian Manufacturing Stabilizes: The Canadian manufacturing sector kicked off 2026 on a surprisingly resilient note, finally breaking a year-long losing streak to post a headline PMI of 50.4. This modest recovery signals that production levels have stabilized after 11 months of contraction, with firms even beginning to hire again in anticipation of better days ahead. Despite this stabilization, the sector is not out of the woods, as trade tensions and rising costs continue to act as a drag on momentum. Tariffs remain a significant disruptor, particularly for trade with the U.S., sending the cost of raw materials like steel and aluminum soaring.
• Canadian Dollar Underperformance: The Canadian dollar is notably lagging its G10 peers despite improved factory data. Investors are currently favoring high-yield currencies and those exposed to the precious metals boom, leaving the loonie in the dust while currencies like the Australian dollar and New Zealand dollar surge. While commodity currencies like the AUD and NZD are rallying on gold spikes and the recent RBA rate hike, the CAD is being bypassed. Even with manufacturing finding its footing, the lack of a compelling yield advantage, direct exposure to the current metals super cycle, and continued trade friction with the U.S. has left the Canadian dollar stuck in neutral while its peers race ahead.
• EUR/USD Consolidation: The euro consolidated just above the 1.18 mark yesterday, which acted as a key short-term support level. The pause in U.S. data releases this week stalled recent USD driven momentum that had pressured the pair. For the remainder of the week, focus shifts to domestic developments, with today's preliminary release of eurozone inflation expected to tick down to 1.7% in January from 2.9% in December. While it is premature for the ECB to directly reference possible intervention on the back of recent euro strength at the policy meeting tomorrow, today's inflation print will be instructive for how markets may interpret any comment on this topic.

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.