USD/CAD Market Update

USD/CAD Slides to 1.3686 – Wednesday, February 25, 2026

Current Level: High-1.36s (24hr range 1.3674–1.3707)

USD/CAD is trading near 1.3686 on Wednesday morning, edging lower from the previous session as the pair holds in the high-1.36s range. The U.S. dollar shows mixed performance across the G10 basket following President Trump's State of the Union address that provided little market-moving content. Markets are positioned for range-bound trading ahead of NVIDIA earnings, with the pair caught between reduced tariff uncertainty and elevated geopolitical concerns.

Market Overview:

Risk appetite is supported this morning, with equity markets looking to extend gains ahead of NVIDIA's results after the bell. The U.S. dollar is mixed versus the G10 basket, with the Australian dollar outperforming due to surprise strength in January's CPI print. Global bond yields are mostly higher, with no major moves worth reporting. Precious metals are higher, with silver prices running into key resistance at the $90 to $92 per ounce range. The combination of reduced tariff uncertainty and AI-related sentiment creates a complex backdrop for currency markets.

State of the Union Offers Little Market Direction:

President Trump delivered the longest State of the Union address on record at 1 hour and 48 minutes, focusing on his record and future plans. The speech provided little new information to impact markets, with Trump softening his tone on tariffs following the Supreme Court decision. He called the ruling disappointing but said he will pursue tariffs through other legal channels. On Iran, Trump promised not to let Tehran acquire a weapon, potentially raising tensions, but also expressed interest in a diplomatic solution. The address followed the Supreme Court's ruling that found many of Trump's tariffs to be illegal, with Trump responding by saying he would create an even stronger solution.

NVIDIA Earnings Take Center Stage:

Markets are focused on NVIDIA's earnings report released after the bell today. The company faces a crucial moment, as its results will impact tech stocks and the global AI trade. Recent AI fears have shaken froth out of tech valuations, with tech price-to-earnings ratios at their lowest relative to the S&P 500 in over five years. This gives NVIDIA some breathing room in their results, though investors still want perfection. The company must beat expectations, raise guidance, and show virtually no weakness. AI sentiment has been a meaningful driver of risk appetite in recent weeks, and the results may increase market volatility.

Corrective Rally Tests Resistance:

The corrective rally in USD/CAD that has been underway since late January has been repelled by resistance at 1.3728 on two occasions. A resistance trendline that lies above at 1.3785 serves as the pivot for the broader downtrend. The pair remains caught in a technical pattern where rallies attract selling interest, while support levels continue to hold. The 1.3790 level remains critical, as a break above would trigger a bullish trend reversal, shifting focus to 1.3856 and nullifying the medium-term bearish view.

Mexican Carriers Resume Service After Cartel Violence:

Canadian carriers including Air Canada, WestJet and Air Transat have reinstated service to Mexican destinations including Puerto Vallarta, Guadalajara and Manzanillo after cartel violence disrupted tourism areas following a military operation against cartel leadership. The Mexican government has restored order in affected regions. Canadian tourists stranded at resort properties reported witnessing unrest but received adequate care from hotel staff, while more than 55,000 Canadians in Mexico had registered with Global Affairs Canada for travel advisories. The resumption of service removes one source of uncertainty for North American travel flows.

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. 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.

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 have taken note of recent Fed messaging, with no meaningful rate cuts priced before July. The persistent nature of price increases, paired with a labor market and consumer base that have shown historical resilience, may force the Federal Reserve to maintain restrictive interest rates for a longer duration. Recent Fed minutes skewed decidedly hawkish, with several participants supporting a two-sided description of the committee's future interest rate decisions.

Technical Picture:

Resistance: 1.3728 (61.8% retracement level that has repelled rallies on two occasions), 1.3785 (resistance trendline serving as pivot for broader downtrend), 1.3856 (bullish reversal target if 1.3785 gives way)
Support: 1.3674 (24hr low), 1.3650 (CIBC near-term range bottom), 1.3629 (initial support), 1.3582 (trendline that must be pierced to end corrective rally and reassert downtrend), 1.3482 (2026 low and critical support)
Outlook: The corrective rally since January 30 has been rejected twice at resistance of 1.3728, with a higher resistance trendline at 1.3790 serving as the pivot for the broader downtrend in place since late November. The 1.3790 level remains critical. A break above would trigger a bullish trend reversal, shifting focus to 1.3856 and nullifying the medium-term bearish view. Downside, prices need to break below the 1.3582 trendline to end the corrective rally and reassert the downtrend, which would bring this year's low of 1.3482 back into focus. The 1 to 3 month technical target remains at 1.3550, consistent with the bearish medium-term outlook while 1.3790 holds. CIBC strategists believe the near-term range of 1.3650 to 1.3750 will hold for the time being.

Week Ahead:

The week ahead features Thursday's U.S. unemployment claims, which will provide an update on labor market conditions. Friday's Canadian GDP release is the main domestic data point, with markets expecting 0.1% monthly growth. U.S. producer price index data on Friday will offer another read on inflation pressures. The following week brings key U.S. labor market data, including the ISM Manufacturing PMI on Monday, JOLTS job openings on Tuesday, ADP employment change on Wednesday, and the full employment report on Friday. 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 1.3650 and 1.3629.

Other Notes:

• EUR/USD Holds Above 1.18: EUR/USD has glided along the 50-day moving average since last week at 1.1774, with its slope and that of other key averages essentially flat, offering little directional bias as the pair waits for its next catalyst. Markets appear to be waiting for additional clarity before folding the Supreme Court tariff ruling into the USD-negative narrative outright and pushing EUR/USD firmly back above 1.18.
• GBP Tests $1.35 Level: Sterling has nudged back above $1.35, helped more by dollar weakness as markets lean into a bearish USD narrative, driven by rising policy uncertainty and a sense that global investors are trimming US exposure after years of outperformance. The latest BoE testimony offered a clearer read on the policy debate. Governor Bailey repeated that he will go into upcoming meetings asking if a cut is justified, but he also warned he has not seen enough evidence to support an immediate move. With February's inflation data arriving after the March meeting, Bailey may want more confirmation before acting.
• Mexican Economy Shows Resilience: The Mexican economy finished 2025 with far more vigor than initially reported as significant upward revisions showed a 0.9% quarterly growth rate in the final quarter. While the 0.6% annual expansion was lower than the 1.4% recorded in 2024, the momentum is undeniable after the third quarter was revised from a contraction to a 0.1% gain. December economic activity proved particularly resilient by jumping 3.3% year over year and 0.4% month over month, prompting analysts to hike their 2026 growth expectations to 1.7%.
• Banxico Poised to Cut Rates: These robust Mexican figures surprisingly provide a green light for Banxico to begin easing policy as early as March with a 25-basis point cut. Even though the February bi-weekly headline inflation print of 3.92% was slightly warm, the core reading cooled to 4.5% which remains the central bank primary focus. The combination of a stable currency and a widening output gap means the 11.00% interest rate from last year is likely headed toward a 6.25% terminal level by June 2026.
• Australian CPI Surprises to Upside: Australian inflation data overnight showed surprise strength in January's CPI print, supporting the Australian dollar's outperformance versus the G10 basket this morning. The data reinforces the Reserve Bank of Australia's hawkish stance and reduces expectations for near-term rate cuts.

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.