USD/CAD Market Update

USD/CAD Slides to 1.3666 – Friday, April 17, 2026

Current Level: Mid-1.36s (24hr range 1.3649–1.3704)

USD/CAD has declined 44 pips to 1.3666 this morning as major geopolitical developments drive broad USD weakness and support risk-on sentiment. Iran's announcement that the Strait of Hormuz is now completely open, combined with the start of a 10-day Israel-Lebanon ceasefire, has sparked a sharp unwind in geopolitical risk premiums. The Canadian dollar has emerged as one of the stronger G10 performers, benefiting from both improved risk appetite and domestic data showing business confidence rebounding to 58.5 in April from a revised 55.7 in March.

Market Overview:

Risk sentiment has surged this morning with equity markets posting one of their most powerful rallies since World War II, as the S&P 500 moves from oversold to overbought territory in just 11 days with a 12% gain. The US dollar is trading at its weakest level since the Iran conflict began, with the DXY declining as safe-haven demand evaporates. WTI oil prices have collapsed nearly 13% to $81 per barrel as the reopening of the Strait of Hormuz removes supply disruption fears. Global bond yields are meaningfully lower as traders rapidly unwind geopolitical risk premiums built up over recent weeks.

Strait of Hormuz Reopens as Diplomatic Progress Accelerates:

The Iranian Deputy Foreign Minister's announcement that the Strait of Hormuz is now completely open has provided the catalyst markets have been waiting for to unwind conflict-related positioning. This development, combined with President Trump's plans to invite Israel and Lebanon to the White House as their 10-day ceasefire begins today, has created powerful momentum for risk assets. The reopening of this critical shipping lane removes immediate supply disruption concerns and signals meaningful diplomatic progress. Markets are interpreting these developments as evidence that the broader regional conflict could soon end, with growing optimism around a comprehensive diplomatic solution.

Canadian Dollar Benefits from Risk-On Dynamics:

The Canadian dollar has gained roughly 1.5% against the US dollar since de-escalation hopes were confirmed, riding a five-day winning streak as USD/CAD retreated from 1.3878 and broke below the key 1.37 level. While these gains are more modest relative to other G10 peers, the performance remains consistent with the currency's typical low-beta profile during broad dollar declines. Domestic sentiment is also showing signs of improvement, with the CFIB Business Barometer Index climbing to 58.5 in April from a downwardly revised 55.7 in March. This rebound in the twelve-month business outlook suggests independent businesses are feeling more optimistic after a period of intense volatility, though cautious positioning remains prevalent among entrepreneurs.

Housing Market Challenges Persist Despite Broader Optimism:

Canadian housing market data continues to show weakness, with the Canadian Real Estate Association reporting that higher mortgage rates could keep buyers on the sidelines during the typically active April-June period. The non-seasonally adjusted national average home price was $673,084 in March, down 0.8% from the same month last year. The MLS Home Price Index fell 0.4% month-over-month, marking the 16th consecutive month of declines. This persistent weakness in housing reflects the ongoing impact of elevated borrowing costs and economic uncertainty on real estate activity across major metropolitan areas.

Canadian Data/Outlook:

Canada's Small Business Confidence rebounded in April, with the CFIB Business Barometer rising to 58.5 from a downwardly revised 55.7 in March. This improvement in forward-looking business expectations suggests entrepreneurs are becoming more optimistic despite recent volatility. The Bank of Canada is expected to maintain its overnight rate at 2.25% at the April 29 meeting, with RBC forecasting no changes through 2026. The central bank continues to emphasize looking through temporary energy-driven inflation spikes while monitoring for broader price pressures, though the recent de-escalation in Middle East tensions should help ease some inflation concerns.

Fed Watch:

The Federal Reserve is expected to hold rates at 3.75% at its April 29 meeting, with markets currently assigning minimal probability to rate cuts this year. The de-escalation in Middle East tensions removes some upside risk to inflation, but Fed officials will likely want to see sustained evidence of lower oil prices and contained inflation expectations before considering policy easing. The underlying US economic outlook and how it absorbs any fading conflict-driven effects will remain the primary focus for policymakers, with core inflation still running above the Fed's 2% target providing support for maintaining restrictive policy.

Technical Picture:

Resistance: 1.3690 (RBC expected trading range low), 1.3760 (RBC expected trading range high)
Support: 1.3630 (trendline support), 1.3625 (key level that would fully unwind corrective rally)
Outlook: USD/CAD is testing support at 1.3728, an area that capped rallies multiple times in February and March. Monday's close below the 200-day moving average at 1.3819 and short-term support at 1.3799 has reinforced bearish momentum. A daily close below 1.3728 would shift focus to trendline support at 1.3630, with a break of that level fully unwinding the corrective rally in place since late January. RBC's 1-3 month technical target stands at 1.3750.

Week Ahead:

Next week brings critical Canadian inflation data on Monday, with markets expecting a 1.0% monthly jump that could bring yearly inflation to 2.5%. The Bank of Canada's trimmed and median CPI readings will provide insight into underlying inflation trends and whether energy price pressures are feeding through to core measures. US retail sales data on Tuesday will test consumer spending resilience, while European PMI data on Thursday will show how the economy performed before recent regional conflicts began to register. These releases will be key for determining if the current upward trajectory in risk sentiment can be sustained.

Other Notes:

• The euro has continued its recovery, with EUR/USD trading above key daily and weekly moving averages and up more than 3% from the conflict-driven March low near 1.14. However, the pair continues to struggle to sustain moves beyond the 1.18-1.19 area, reinforcing that resilience should not be confused with conviction.
• Sterling has failed to draw meaningful bullish momentum from recent positive economic data, with short-end yields falling around 10 basis points this week as bond markets unwind conflict-related hawkish repricing. The pound is holding just south of 1.36 as the broader risk-on rally shows signs of losing steam.
• The Mexican peso has staged a strong comeback as relief rallies sweep through currency markets, with USD/MXN moving back toward the 17.25 area close to year-to-date lows. The recent spike in volatility has faded, allowing the peso to reclaim its standing among high-yielding emerging market peers.
• Gold prices are surprisingly trading as a risk-on asset since the Iran conflict started, with precious metals higher despite the broad improvement in risk sentiment. This unusual dynamic reflects the metal's evolving role in portfolios amid persistent inflation concerns and currency debasement fears.

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.