USD/CAD Market Update

USD/CAD Softens to 1.3590 – Thursday, February 12, 2026

Current Level: Mid-1.35s (24hr range 1.3556–1.3597)

USD/CAD is trading near 1.3590 on Thursday morning, pulling back from yesterday's brief rally following the U.S. employment report. The pair has returned to its mid-1.35 range after markets reverted to pre-release levels, with the initial U.S. dollar strength from the payrolls surprise proving short-lived. The Canadian dollar is holding steady despite ongoing trade policy uncertainty, as the U.S. House of Representatives passed a measure to remove tariffs on Canada, though the ultimate outcome remains uncertain.

Market Overview:

Risk appetite is mixed this morning, with equity markets showing limited direction as traders digest the implications of yesterday's employment data and ongoing political developments. The U.S. dollar is lower against most G10 currencies, reversing gains from the payrolls release. Global bond yields are relatively stable with no major moves across the curve. Precious metals continue to stabilize following recent volatile trading, while the focus remains on broader market sentiment and upcoming economic data releases.

U.S. Payrolls Surprise Fails to Sustain Dollar Rally:

Yesterday's U.S. nonfarm payrolls report showed stronger-than-expected job growth, with 130,000 positions added in January against consensus expectations of approximately 65,000. The unemployment rate declined to 4.3% from the forecasted 4.4%, indicating continued labor market resilience. The U.S. dollar initially strengthened on the news, but markets quickly reverted to pre-release levels where they remained for the rest of the day.

The Bureau of Labor Statistics also released annual benchmark revisions alongside the report, marking down the twelve months through March 2025 by approximately 898,000 on a seasonally adjusted basis. This represents a downward revision of 0.6%, recasting 2025 as a year that added just 181,000 jobs in total, about 15,000 per month. It was the weakest hiring year since 2020, and the weakest outside recession since 2003. The anatomy of job creation underscores underlying fragility, with employment showing little net change since April 2025 and gains unusually concentrated in health care and social assistance. In January alone, health care added roughly 82,000 jobs and social assistance 42,000, while many other industries were little changed.

House Votes to Overturn Canadian Tariffs:

The U.S. House of Representatives voted 219 to 211 to overturn President Trump's tariffs on Canada, with six Republicans joining Democrats in support. However, the tally fell short of the two-thirds majority needed to override a presidential veto. The Senate has already passed similar legislation to cancel the tariffs. Democrats have also triggered procedural mechanisms to force votes on tariffs affecting Mexico and additional levies in coming weeks, while markets await a Supreme Court ruling on the tariff measures.

The development adds uncertainty as markets move closer to the CUSMA negotiations, which will likely be a key driver for the Canadian dollar and Canadian economic growth more broadly. The USMCA agreement faces a scheduled review for potential extension by July 1. An unfavorable renegotiation or the absence of a renewed deal could weigh on the Canadian economy, particularly if tariffs persist. President Trump is expected to veto the House measure, leaving the ultimate ruling to the Supreme Court. This development highlights growing political pressure before the upcoming midterm elections, with many voting constituents concerned over the economic impact of import duties.

Tumbler Ridge Tragedy Shakes Canada:

Canada mourns following a mass shooting in Tumbler Ridge, British Columbia, that killed nine people according to revised RCMP figures. The victims include a teacher at Tumbler Ridge Secondary School and five students aged 13 to 17, while 27 others were injured. Authorities identified the shooter as Jesse Van Rootselaar, an 18-year-old local resident who died from a self-inflicted gunshot wound. His mother and stepbrother were also found dead in the family home. Flags are at half-mast across the country as the nation processes one of its deadliest school shooting incidents.

Canadian Data/Outlook:

Canada has no major economic data releases today, with the focus remaining on broader market developments and U.S. data. The Bank of Canada is expected to remain on hold at 2.25% through the remainder of 2026, with the central bank comfortable at the bottom of the neutral range for the foreseeable future. RBC forecasts the BoC overnight rate to remain at 2.25% through all of 2026. The Canadian dollar faces headwinds from trade policy uncertainty and the potential for USMCA renegotiation, though the light Canadian economic calendar leaves the pair vulnerable to U.S. data releases and global risk sentiment shifts.

Fed Watch:

The Federal Reserve is expected to remain on hold at its next policy meeting on March 18, with current market pricing pointing to a resumption of interest rate cuts in July. Markets are pricing in a total of two cuts by year-end following yesterday's employment data, which showed continued labor market resilience despite the significant downward benchmark revisions. RBC forecasts the Fed funds rate upper bound to remain at 3.75% through the end of 2026. Any shift in positioning for a more hawkish Fed could curb the recent USD weakness, though the broader trend of diversification away from U.S. assets continues to act as a headwind for the dollar.

Technical Picture:

Resistance: 1.3597 (24hr high), 1.3629 (must hold above to maintain corrective rally), 1.3728 (61.8% Fibonacci retracement and key resistance), 1.3806 (secondary resistance)
Support: 1.3556 (24hr low and near-term support), 1.3529 (downside target), 1.3482 (January low and key support level), 1.3420 (September 2024 low)
Outlook: The corrective rally has lost steam at resistance level 1.3728, with Monday's close below 1.3629 support suggesting the bounce is exhausted. Downside targets at 1.3529 and the January low of 1.3482 are back in focus. A daily close above 1.3728 would be needed to extend the correction toward secondary resistance at 1.3806, while the broader downtrend pivot remains at 1.3841. The strategic view remains to continue selling USD/CAD rallies, with 1.3932 marking strong resistance and the likely top of the current range.

Week Ahead:

The week ahead features Friday's U.S. CPI report as the key event, with expectations for both headline and core inflation to decline to 2.5% year-over-year. The inflation data will provide crucial insight into whether price pressures are easing as the Federal Reserve hopes or remaining sticky. For USD/CAD, the immediate question is whether the pair can hold support at 1.3556 or if a sustained break below this level will open the door to deeper losses toward 1.3482. The USMCA review deadline on July 1 adds a longer-term source of uncertainty for the Canadian dollar, though markets will likely wait for more concrete developments before pricing in significant trade policy changes.

Other Notes:

• UK GDP Misses Expectations: The UK economy expanded by 0.1% in Q4 2025, matching the previous quarter's pace but missing expectations of 0.2%. The British Pound weakened on the news and remains lower than pre-release levels. Quarter-on-quarter growth came in below forecasts, with services flat, production a touch firmer, and construction weak. On an annual basis, output rose 1.0%, below the 1.2% forecast. The data adds to pressure on Prime Minister Starmer, with political uncertainty continuing to weigh on sterling sentiment.
• EUR/USD Supported by Diversification: The euro remains one of the most liquid alternatives in the G10 space, with ongoing diversification away from U.S. assets helping to support the currency. Policy uncertainty in the U.S. continues to act as a headwind for the dollar, allowing EUR/USD to trade above fair value estimates. The pair is holding well above key moving averages, with the bullish structure remaining intact. Reports that Chinese regulators have encouraged banks to limit or trim U.S. Treasury exposure, alongside data showing China's Treasury holdings at a 17-year low, add to the narrative pressure on the dollar.
• Memory Stocks Surge on AI Demand: Memory stocks are experiencing significant gains as the AI supercycle picks up steam. Unprecedented AI data center demand and the rapid adoption of generative AI have created massive demand for high-capacity storage and high-bandwidth memory. This has led to a severe supply shock that has caused memory prices to soar. Many analysts view this not as a typical boom-and-bust cycle but rather a structural, long-term shift driven by AI, leading to a supercycle that is expected to last through 2026 to 2027.
• Precious Metals Stabilization: Precious metals are stabilizing after the mass deleveraging event that took place in late January. Gold remains above recent lows, with the stabilization suggesting the sharp correction was a liquidation of leveraged positions rather than a trend change. The lack of follow-through selling indicates the worst of the volatility may have passed.

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.