USD/CAD Market Update

USD/CAD Firms to 1.3710 – Thursday, February 26, 2026

Current Level: High-1.37s (24hr range 1.3659–1.3694)

USD/CAD is trading near 1.3710 on Thursday morning, gaining 24 pips from the previous session as the pair holds in the high-1.37s range. The U.S. dollar shows mixed performance across the G10 basket, with the Japanese Yen outperforming after Bank of Japan officials repeated a hawkish stance. Markets remain focused on Friday's Canadian GDP release, with 0.1% monthly growth expected, while weak domestic employment data underscores ongoing economic challenges.

Market Overview:

Risk appetite is fragile this morning, with North American equity markets lower as NVIDIA's blockbuster earnings failed to lift sentiment. The company reported quarterly results that exceeded estimates, with Q1 sales expected to reach $78 billion versus $72 billion consensus. Despite crushing all Wall Street estimates, the stock traded lower by approximately 3% as the price was seemingly priced to perfection. Global bond yields are lower with no major moves worth reporting. Precious metals are lower, with silver selling off after failing to break the $91 to $92 resistance level. The combination of strong AI-related earnings and cautious market reaction highlights investor skepticism around elevated tech valuations.

U.S. Labor Market Shows Continued Resilience:

U.S. initial jobless claims came in slightly below consensus at 212K this morning, an unsurprising result given filing delays around the President's Day holiday week. Continuing claims continue to trend lower. The claims report highlighted fewer layoffs in construction, transportation, and warehousing sectors across New York and Pennsylvania. With major winter storms hitting the Northeast this week, next week's data may show administrative distortions from delayed filings. This morning's data reinforces the view that the unemployment rate should continue moving sideways in an environment of limited layoffs. The persistent strength in the labor market supports the Federal Reserve's patient approach to monetary policy.

Canadian Employment Data Shows Broad Weakness:

Canada's January SEPH employment data showed broad-based job declines led by manufacturing, down 7K, wholesale trade, down 6K, transportation and warehousing, down 6K, and food service and accommodation, down 5K. For 2025 as a whole, employment fell 28K with manufacturing the primary drag at negative 41K, followed by retail, down 21K, and wholesale, down 16K. These figures reflect clear negative impacts from U.S. trade actions and heightened uncertainty. Healthcare and social assistance provided the only material offset, adding 64K positions over the year. The weakness in goods-producing sectors and trade-related industries underscores the challenges facing the Canadian economy amid ongoing trade policy uncertainty.

Keystone XL Pipeline Project Gets New Life:

TC Energy's abandoned Keystone XL pipeline project is getting new life through alternative routes. After TC Energy scrapped the Alberta-to-Gulf Coast line in 2021 following years of opposition, a private U.S. firm applied last month to construct a 550,000 barrel-per-day pipeline moving Canadian crude through Wyoming, using the same cross-border location originally planned for Keystone XL. Separately, TC Energy spinoff South Bow Corp. is reportedly exploring ways to leverage existing pipeline networks to increase U.S. crude exports, effectively reviving the project's core objective through different means. The development could provide long-term support for Canadian energy exports if the projects advance through regulatory approval.

Bank of Korea Turns Hawkish as Stock Market Surges:

The Bank of Korea kept interest rates unchanged as expected, but the decision leaned hawkish as none of the policymakers envisioned rate cuts in the next six months. The Bank increased forecasts for 2026 GDP to 2.0% versus 1.8% prior, along with CPI to 2.2% versus 2.1% prior. The hawkishness comes at the same time the nation's stock market officially enters the parabolic stage of the rally. The KOSPI, which returned 125% in 2025, is already up nearly 50% on a year-to-date basis, led by outsized gains in Samsung and SK Hynix due to the global memory shortage. The KOSPI is flashing warning signs of what looks to be a classic blow-off structure, though bubbles can take a long time to inflate.

Canadian Data/Outlook:

Canadian GDP data due Friday will be the next domestic catalyst, with 0.1% month-over-month growth expected. The Bank of Canada is expected to remain on hold at 2.25% through the remainder of 2026, with RBC forecasting the BoC overnight rate to remain at 2.25% through all of 2026. The central bank is comfortable at the bottom of the neutral range. The weak SEPH employment data released today adds to concerns about domestic economic momentum, though policymakers are likely to view the weakness as reflecting structural factors and trade uncertainty rather than cyclical deterioration requiring additional rate cuts. The Canadian dollar faces headwinds from trade policy uncertainty and the potential for USMCA renegotiation.

Fed Watch:

The Federal Reserve is expected to remain on hold at its next policy meeting on March 18, with RBC forecasting 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. This indicates that if inflation remains at above-target levels, the Fed is prepared to consider upward adjustments to the target range for the federal funds rate, rather than just maintaining or cutting them.

Technical Picture:

Resistance: 1.3728 (61.8% retracement level that has twice been rejected), 1.3779 (trendline serving as pivot for broader downtrend since late November), 1.3856 (bullish reversal target if 1.3779 breaks)
Support: 1.3659 (24hr low), 1.3650 (CIBC near-term range bottom), 1.3629 (initial support), 1.3579 (trendline that must break to end corrective rally and reassert downtrend), 1.3482 (2026 low and critical support)
Outlook: The corrective rally since January 30 has twice been rejected at resistance of 1.3728, with a more significant resistance trendline at 1.3779 above serving as the pivot for the broader downtrend in place since late November. Bearish bias remains intact unless 1.3779 trendline breaks, which would generate a bullish trend reversal and shift focus to 1.3856. A bearish breakout below 1.3579 would bring this year's low of 1.3482 back into focus as the next downside target. CIBC strategists expect a near-term band of 1.3650 to 1.3750, with the broader 1.3600 to 1.3900 range favored ahead of USMCA negotiations.

Week Ahead:

The week ahead features Friday's Canadian GDP release as the main domestic data point, with markets expecting 0.1% monthly growth. A flat or positive print could reinforce the Bank of Canada's hold stance and potentially push USD/CAD toward support at 1.3650. U.S. producer price index data on Friday will offer another read on inflation pressures, with both headline and core PPI expected to moderate from the previous month. The following week brings a heavy slate of 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 1.3629.

Other Notes:

• NVIDIA Results Fail to Impress Markets: NVIDIA released quarterly results that exceeded estimates, with Q1 sales expected to reach $78 billion versus $72 billion consensus. Ten years ago, the company barely surpassed a billion in quarterly revenue. Today, that number has increased by 78 times, representing exponential growth. Gross margins topped expectations and CEO Jensen Huang said customers are quickly investing in AI infrastructure, powering what he calls a new AI industrial revolution. Despite crushing all Wall Street estimates, the stock traded lower by approximately 3% as the price was seemingly priced to perfection. The results reinforce that the AI trade has legs so long as the hyperscalers, including Meta, Google, Amazon, and Microsoft, continue to increase capital expenditure on data centers.
• EUR/USD Holds Above Fair Value: The euro remains comfortable above fair value, with the dollar advancing against most of its major counterparts. Measures of implied currency volatility are tracking near historic norms as foreign exchange traders downplay tariff risks. The combination of reduced tariff uncertainty and elevated geopolitical concerns creates a complex backdrop for the single currency. EUR/USD has held its 50-day moving average this week, but technical indicators suggest the recent uptrend may be losing momentum.
• GBP Tests Key Support Levels: Sterling had a modestly good session yesterday despite quieter markets. The FTSE 100 hit new record highs on strong results from HSBC. The banking sector, alongside more traditional areas such as mining, have attracted renewed interest at a time when the tech sector faces heightened scrutiny amid growing concerns around AI. As a more traditional bundle of equities, the FTSE 100 has seen a clear pickup in demand. GBP/USD continues to show reluctance to break more decisively below key support levels such as the 200-day moving average at 1.3448.
• Small Business Sentiment Rebounds in Canada: According to the February 2026 CFIB Business Barometer, Canadian small business sentiment has experienced a significant rebound, with the long-term optimism index surging by 5.4 points to reach 64.8. This recovery places both long-term and short-term outlooks well above their historical averages. The improved morale is reflected in a second consecutive month of positive staffing intentions, with 19% of employers planning to hire versus 13% expecting layoffs. Despite this surge in confidence, the report highlights persistent structural challenges, with insufficient demand cited by 49% of SMEs as a primary barrier to growth.

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.