USD/CAD Market Update

USD/CAD Tumbles to 1.3646 – Friday, February 06, 2026

Current Level: Mid-1.36s (24hr range 1.3625–1.3725)

USD/CAD is trading near 1.3646 on Friday morning, pulling back from overnight highs as the Canadian dollar finds support following this morning's mixed employment report. The pair remains within the established 1.36 to 1.37 range that has defined trading in recent sessions, with neither the headline job losses nor the surprise drop in unemployment providing enough conviction to break the consolidation. Markets remain focused on broader risk sentiment as equities stabilize after yesterday's technology sector selloff and precious metals continue their recovery from last week's historic correction.

Market Overview:

Risk appetite is recovering this morning, with equity markets opening higher as traders look for value after yesterday's significant selloff in technology stocks. The U.S. dollar is lower against the G10 basket as the recovery in risk sentiment weighs on the greenback. Global bond yields are lower with no major moves worth reporting. Precious metals are supported, with silver and gold recovering after yesterday's drawdown. The market continues to digest the massive capital expenditure guidance from major technology companies, with an estimated $600 billion in spending pledged this year by Microsoft, Meta, Alphabet, and Amazon alone. That spending equals roughly 27% of Canada's full year GDP for 2025, highlighting the scale of investment in artificial intelligence infrastructure.

Canadian Employment Data Shows Mixed Signals:

Canadian employment for January decreased by 24,800 jobs versus expectations for a gain of 5,000, coming in well below even the most bearish estimate. The decline was entirely concentrated in part-time work, which fell 69,700, while full-time employment actually rose 44,900. The unemployment rate unexpectedly fell from 6.8% to 6.5%, but that was due to people leaving the workforce as seen in a lower participation rate that dropped to 65.0% from the expected 65.4%. Salary growth for permanent workers slowed to 3.3% from 3.7%, highlighting easing wage pressures in the labour market.

The report reveals structural softness that validates the market's hesitation to pick a direction. Private sector employment shrank by 52,000, signaling weaker business demand. With employment falling in key economic engines like Ontario, which lost 67,000 jobs, and manufacturing shedding 28,000 positions, the data paints a picture of an economy that is rebalancing rather than collapsing. This ambiguity leaves the Bank of Canada with little pressure to drastically alter its course. The data is unlikely to prompt any immediate changes to the BoC's monetary policy regime, keeping the pair anchored in its current consolidation pattern as traders await a clearer catalyst.

U.S. Jobs Report Delayed as Markets Await Key Data:

Markets remain in a holding pattern as investors await the delayed U.S. nonfarm payrolls report, which may be released next week. The absence of this key data point has left the dollar without a fresh catalyst, contributing to range-bound trading across major currency pairs. Risk sentiment rebounded overnight, with easing concerns over artificial intelligence spending lifting the Nasdaq 100 and S&P 500 futures. Bitcoin also recovered from the two-year low reached earlier this week, potentially signaling an improved market outlook for today's trading session.

The latest U.S. labour data added to the cautious tone earlier this week. The Challenger report showed companies announced 108,400 job cuts in January, the highest for that month since 2009. New hiring announcements totaled just 5,306, the lowest January figure in 16 years. Initial jobless claims also rose to 231,000, a two-month high and well above expectations of 212,000. Job openings dropped to 6.54 million in December, falling 386,000 month over month and declining more than 900,000 since October. Taken together, the run of weaker labour indicators reinforced expectations of Fed easing this year, with markets continuing to price a first rate cut in June and a second potentially following in September.

Geopolitical Developments Add to Market Uncertainty:

The U.S. issued a warning overnight telling American citizens to leave Iran immediately, while nuclear talks between the U.S. and Iran took place in Oman this morning. Markets will monitor developments closely, though range-bound momentum and recent trading patterns are expected to persist through today's session. The geopolitical backdrop adds another layer of uncertainty to an already complex market environment, though currency markets have shown limited reaction to the developments so far.

Canadian Data/Outlook:

This morning's employment data showed a mixed picture that is unlikely to change the Bank of Canada's current policy stance of being comfortably on hold at the bottom of the neutral range for the foreseeable future. Although USD/CAD started to edge lower ahead of the data print, today's data is not sufficient to break the pair out of recent ranges. The jobless rate being closer to 6.5% than 7.0% suggests some resilience in the labour market, though the decline in net employment and falling participation rate indicate underlying softness. RBC forecasts the BoC overnight rate to remain at 2.25% through all of 2026. The federal government introduced a comprehensive automotive strategy centered on tax incentives designed to encourage manufacturers to invest and expand operations in Canada, including a new EV rebate program providing purchase or lease incentives of up to $5,000 for battery electric and fuel cell vehicles.

Fed Watch:

The Federal Reserve is expected to remain on hold at its next policy meeting on March 18, with markets pricing a first rate cut in June and a second potentially following in September. The recent softness in U.S. labour market indicators has reinforced expectations of Fed easing this year, though the central bank has maintained that any moves will be data dependent. RBC forecasts the Fed funds rate upper bound to remain at 3.75% through the end of 2026. A tougher equity backdrop would normally support the USD as investors rotate out of risk, but the scope for further gains looks limited. A U.S. led equity correction would ultimately hit U.S. activity hardest, force the Fed into more aggressive easing, and weaken the dollar rather than strengthen it. The broader diversification theme and rise in dollar hedging demand still hangs over the currency, likely capping any sustained upside.

Technical Picture:

Resistance: 1.3725 (24hr high), 1.3728 (61.8% Fibonacci retracement), 1.3806 (secondary resistance), 1.3932 (strong resistance marking likely range top)
Support: 1.3625 (24hr low, must hold to maintain corrective scenario), 1.3578 (deeper support), 1.3494 (76.4% retracement of 2023-2025 rally), 1.3482 (key support level)
Outlook: USD/CAD is trading in the mid-1.36s as the pair consolidates within the tight 1.36 to 1.37 range. A bullish reversal pattern formed last week 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. CIBC strategists remain buyers at 1.3600 and sellers at 1.3900, favoring this range for the time being. Price action remains in a downtrend, hugging the 61.8% Fibonacci level of the trend channel. The strategic view remains unchanged, with rallies viewed as selling opportunities.

Week Ahead:

The focus next week shifts to the delayed U.S. nonfarm payrolls report, which will provide critical insight into labor market conditions. The timing of the release remains uncertain due to the recent government shutdown. The UK inflation report due February 18 will be crucial in gauging whether inflation developments align with the Bank of England's projected disinflationary path, particularly after yesterday's dovish shift that saw four dissenters favor a cut. For USD/CAD, the immediate question is whether the pair can maintain support at 1.3626 or if the recent rally from oversold conditions will stall at technical resistance near 1.3728. The absence of major Canadian data releases next week leaves the pair vulnerable to broader dollar moves and risk sentiment shifts.

Other Notes:

• ECB Holds Rates, Pushes Back on Euro Strength Concerns: The European Central Bank kept rates unchanged at its first meeting of 2026 as expected, reiterating that inflation should converge toward its 2% target over the medium term. The Governing Council described policy as being in a good place, noting a resilient euro area economy but acknowledging that the outlook remains clouded by global trade uncertainty. President Lagarde pushed back against the idea that policymakers are alarmed by the stronger euro, stressing that the currency is broadly in line with historical averages and that recent moves were already embedded in the ECB's baseline, including an assumed EUR/USD rate of $1.16 for this year. With EUR/USD now trading around $1.18, the urgency for the ECB to lean against euro strength has faded.
• Bank of England Delivers Dovish Hold: While a steady Bank of England was widely expected, the stronger dovish tilt was not anticipated, illustrated by the 5 to 4 vote split with four dissenters favoring a cut. Governor Bailey sounded more confident in the UK's disinflationary outlook, noting that there should be scope for some further reduction in Bank Rate this year. Traders responded by sharply increasing the probability of a March cut from around 20% to roughly 65%. Sterling shed ground across the board, with the dovish tone clearly jeopardizing short-term bullish momentum, particularly against the euro.
• Precious Metals Stabilize After Volatile Week: Precious metals are supported this morning with silver and gold recovering after yesterday's drawdown. The stabilization follows last week's historic selloff that was triggered by the nomination of Kevin Warsh as the next Federal Reserve Chair. Volatile swings in precious metals are spilling into EUR/USD, with sharp silver selloffs giving the dollar a lift. The 20-day correlation between EUR/USD and both gold and silver now sits in the 75th percentile of the past five years, a reminder that metals sentiment is exerting an unusually strong pull on the pair at present.
• Technology Sector Volatility Continues: Equity markets show growing divergence as software companies face selling pressure after Anthropic released updates to its AI automation platform. Amazon shares tumbled 11% in extended trading after outlining plans to spend $200 billion on artificial intelligence this year, a colossal outlay that has fueled concern the long-term payoff may fall short of expectations. The sector's sensitivity to AI related capital expenditure is increasingly dictating broader risk sentiment. This week has underscored how tightly correlated risk assets have become and how fragile sentiment remains.

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. Vantry Capital Inc.