USD/CAD Market Update

USD/CAD Softens to 1.3666 – Wednesday, February 18, 2026

Current Level: Mid-1.36s (24hr range 1.3637–1.3679)

USD/CAD is trading near 1.3666 on Wednesday morning, edging lower from the previous session as the pair holds in the mid to high 1.36 range. The U.S. dollar shows mixed performance across the G10 basket, with USDCAD maintaining recent gains despite a quiet data calendar. Markets are positioned for mostly range-bound trading, with resistance at 1.3728 continuing to cap rallies and attract selling interest.

Market Overview:

Risk appetite is recovering this morning, with U.S. equity futures climbing as investors look past recent artificial intelligence-related concerns. The U.S. dollar displays mixed performance, holding steady against most major currencies. Global bond yields are slightly higher, though no major moves are worth reporting. Precious metals are stronger, with gold and silver recovering from yesterday's drawdown. The combination of improving equity sentiment and a very quiet data calendar creates a backdrop for limited foreign exchange volatility.

FOMC Minutes and U.S. Policy Outlook:

Today's key event is the release of the Federal Reserve's meeting minutes from last month's policy decision. The minutes will provide insight into how aligned policymakers were around the recent shift in tone and whether the bar for rate cuts is lower than Chair Powell suggested. Markets are primed to trade weak data asymmetrically, with softer prints reinforcing the view that the economy is losing momentum and keeping the dollar under pressure. Any resilience in the data would challenge the dovish narrative that has taken hold. The minutes land against a backdrop of strong jobs data and softer inflation that have shaped expectations around how quickly policymakers can pivot.

U.S.-Japan Trade Deal Signals Broader Shift:

The U.S. and Japan finalized a trade agreement yesterday worth $550 billion, with Japan committing an initial $36 billion toward U.S. oil, gas, and critical minerals investments. In exchange, President Trump reduced tariffs on Japanese exports to 15% from 25%. Japan faces a 45-day window to fulfill its funding commitments under the deal. The agreement represents a significant shift in U.S. trade policy, moving toward bilateral deals rather than multilateral frameworks. The development has implications for other trading partners, including Canada, as it demonstrates the administration's willingness to negotiate tariff reductions in exchange for specific commitments.

Canada Deploys Historic Trade Mission to Mexico:

Canada has deployed its largest-ever trade mission to Mexico, running from February 15 to 20, 2026. Led by Minister Dominic LeBlanc, the delegation comprises more than 370 representatives from over 240 organizations. The stated objectives include deepening Canada-Mexico integration ahead of the 2026 CUSMA review, diversifying Canadian exports beyond the U.S. market, and strengthening Canadian participation in North American supply chains. The focus areas include advanced manufacturing, particularly automotive, agri-food, clean energy, information and communications technology, and creative industries.

Recent developments indicate growing momentum toward a renewed trilateral agreement that could provide support for both the Mexican peso and Canadian dollar. There are complementary strengths between Latin America and Canada in the mining and financial sectors that may offer opportunities for mutually beneficial collaboration. This initiative suggests that Ottawa views Mexico as an increasingly strategic partner within a more diversified North American framework, which could have implications for long-term trade flows and nearshoring-related investment activity.

Canada Unveils Defence Industrial Strategy:

Canada has unveiled a new Defence Industrial Strategy designed to reduce dependence on American military equipment. The government projects this initiative will allow Canadian companies to access $180 billion worth of defence contracts and $290 billion in defence capital investments, potentially creating $125 billion in economic value and 125,000 positions through 2035. Prime Minister Mark Carney emphasized the strategy's focus on developing independent capabilities in key sectors like shipbuilding, aerospace, and unmanned systems, noting that Canada has historically depended too much on its geographic position and allies for security. The strategy represents a significant shift in Canadian defence policy and could have implications for domestic manufacturing and investment flows.

Canadian Consumer Sentiment on Chinese EVs Shifts:

A recent Bloomberg survey reveals that half of Canadian consumers would not be discouraged from purchasing an electric vehicle manufactured in China. This represents a significant shift in public opinion, with 53% of respondents indicating Chinese production would not influence their buying decisions, a dramatic increase from just 25% who felt similarly the previous year. This change coincides with improving China-Canada trade relations during a period of U.S. trade tensions, following Prime Minister Mark Carney's recent decision to permit 49,000 Chinese electric vehicles into Canada annually under reduced tariff rates. The shift in consumer sentiment could have implications for Canadian trade policy and the domestic automotive sector.

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 CUSMA renegotiation, though the light Canadian economic calendar leaves the pair vulnerable to U.S. data releases and global risk sentiment shifts. The ongoing trade mission to Mexico and new defence strategy signal a broader effort to diversify economic relationships and reduce dependence on the United States.

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 unchanged policy through the near term. RBC forecasts the Fed funds rate upper bound to remain at 3.75% through the end of 2026. Markets are not expecting a major surprise from today's FOMC minutes, keeping their focus on jobs and inflation data. The divergence between GDP and the job market over the last several years has made activity data less important to the Fed. U.S. durable goods and industrial production data are in focus today, offering a timely read on the strength of U.S. demand and manufacturing at a moment when markets are primed to trade weak data asymmetrically. Softer prints would reinforce the view that the economy is losing momentum and keep the dollar under pressure, while any resilience would challenge the dovish narrative that has taken hold.

Technical Picture:

Resistance: 1.3728 (61.8% retracement of 2023-2025 advance and key resistance level that continues to cap rallies and attract selling interest), 1.3810 (trendline serving as downtrend pivot and stop loss for bearish outlook), 1.3900 (CIBC selling level and likely range top)
Support: 1.3637 (24hr low), 1.3600 (CIBC buying level and key support), 1.3558 (initial downside support level), 1.3494 (76.4% retracement of 2023-2025 advance), 1.3482 (Jan 30 low and critical support zone)
Outlook: Resistance at 1.3728 continues to cap USD/CAD rallies and attract selling interest amid the medium-term downtrend. The trendline at 1.3810 serves as the downtrend pivot and stop loss for the bearish outlook. Initial support sits at 1.3558, with the critical support zone at 1.3482/1.3494 having held after a second test last week. A daily close below 1.3482 would be required to activate a new bearish momentum phase, exposing the September 2024 low at 1.3420. CIBC strategists continue to think that current levels favor USD buyers, targeting a 1.3600 to 1.3900 range in the near term.

Week Ahead:

The week ahead features today's FOMC meeting minutes as the immediate focus, providing insight into the Fed's thinking around the recent policy stance. Friday brings a heavy slate of U.S. data, including Q4 GDP, the core PCE price index, and flash PMI readings. Markets expect GDP growth to moderate to 3.0% from 4.4% previously, while core PCE is forecast to tick higher to 0.3% monthly. The data will be crucial in determining whether the Fed's patient approach remains appropriate or if adjustments to the policy path are warranted. For USD/CAD, the immediate question is whether the pair can break above resistance at 1.3728 or if renewed selling pressure will push the pair back toward support at 1.3600 and 1.3558.

Other Notes:

• U.S.-Iran Nuclear Talks Progress: The U.S. and Iran reached an understanding on guiding principles in their indirect nuclear talks, though a full agreement remains distant. Geopolitics adds another layer to market sentiment, though oil's inability to rebound has capped USD upside. The development suggests potential for reduced tensions in the Middle East, which could have implications for energy markets and risk sentiment.
• RBNZ Holds Rates, Signals Caution: The Reserve Bank of New Zealand was more dovish than expected in its February monetary policy statement, pledging to remain accommodative for some time with no rush to increase interest rates. The RBNZ noted that while risks to prices are balanced, cautious household spending could slow the economic recovery. The New Zealand dollar is under pressure following the announcement, in contrast to Australia's central bank, which recently hiked interest rates. The divergence highlights different inflation dynamics across the region.
• EUR/USD Holds Above Fair Value: The euro remains comfortable above fair value, with the February low at 1.1766 aligning with the 21-day moving average, reinforcing that euro buyers are in firmer control. Talks around boosting the euro's international role continue, with ECB Executive Board member Piero Cipollone stressing that greater use of the euro in trade invoicing would make the eurozone less vulnerable to foreign exchange volatility. News over the weekend that the ECB expanded its EUREP repo lines from a narrow European audience to the global central bank community keeps the dollar diversification story alive in investors' minds.
• Lagarde May Step Down Early: Christine Lagarde, European Central Bank President, is reportedly considering stepping down before her term concludes in October 2027. Reports indicate she may leave ahead of France's April 2027 presidential election, potentially allowing French President Emmanuel Macron and German Chancellor Friedrich Merz to nominate her successor. The euro showed only a muted reaction to the reports, suggesting investors are weighing not just the prospect of a more hawkish successor, but also the risk of a leadership vacuum at a delicate point in the policy cycle.
• RBC Currency Report Card Released: RBC released its February Currency Report Card, maintaining its view that the USD is in a multi-year weakening cycle. The bank continues to expect moderate USD weakness this year and into next year amid structural drivers of diversification, including hedging flows and capital reallocations, as well as rising risk premia in U.S. assets. RBC is most bullish on high carry currencies in the medium term, including the Norwegian krone in G10 and the Brazilian real in emerging markets.

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.