USD/CAD Market Update

Current Level: Mid-1.36s (24hr range 1.3644–1.3672)

USD/CAD is trading at 1.3648 this morning, essentially unchanged from yesterday's 1.3658 close and marking the tightest daily range of the week at just 28 pips. President Trump's decision late Tuesday to extend the Iran ceasefire indefinitely removed an obvious downside catalyst for the dollar, but a renewed round of Iranian attacks on commercial vessels in the Strait of Hormuz has kept defensive flows active. The pair remains anchored above 1.3642, the critical support that has capped downside for three consecutive sessions.

Market Overview:

Risk sentiment is constructive but disciplined. Equity futures are pointing higher with major US indices trading near all-time highs as strong corporate earnings and the ceasefire extension outweigh geopolitical noise. Global bond yields are edging modestly higher, with Treasury yields firmer on continued Fed patience pricing. The US dollar is little changed against the G10 basket, with currency markets growing increasingly desensitized to Iran headlines after eight weeks of conflict. WTI crude remains elevated near $90 per barrel after trading as high as $92 yesterday, still well above the pre-conflict baseline but stable as traders digest the open-ended ceasefire terms. Short-term implied volatility has compressed further as the economic data calendar thins ahead of next week's central bank cluster.

Indefinite Ceasefire, Active Strait:

President Trump extended the Iran ceasefire indefinitely after Tuesday's expiry, with Vice President JD Vance's scheduled trip to Pakistan postponed after Iranian officials declined to meet, citing "unreasonable demands" from Washington. The ceasefire has no fixed end date and will remain in place until talks conclude, but the US naval blockade of Iranian shipping remains fully in force. CIBC reports Iranian gunboats attacked commercial vessels in the Strait this morning and seized two ships for alleged violations, with a third attack reported in the last hour. Iran has signaled willingness to return to negotiations only if the blockade is lifted, while the US has given no indication it will do so. CIBC's strategists continue to view the setup as leaning bearish for USD/CAD but maintain a base case that a deal is ultimately reached. The pair's asymmetry remains clear: USD/CAD stays resilient to further downside while escalation risk is contained, but is vulnerable to a renewed defensive bid if diplomacy stalls for an extended period.

Warsh Hearing Non-Directional:

Fed Chair nominee Kevin Warsh's Senate Banking Committee appearance yesterday delivered little new information for the dollar. Warsh pledged to maintain central bank independence, told the committee President Trump had not requested any commitment on specific rate decisions, and emphasized inflation persistence in a way markets took as mildly reassuring. His call for reform of the Fed's communications and frameworks was short on specifics. The hearing removed a potential downside tail for the dollar but did not meaningfully shift the policy path. Procedural hurdles also remain material: Senator Thom Tillis has vowed to block the nomination until the Justice Department ends its investigation of departing Chair Powell, and CNBC reporting suggests Trump has no intention of backing down.

Canadian Data/Outlook:

No major Canadian data today. Monday's softer-than-feared March CPI at 2.4% year-over-year and the Bank of Canada's quarterly surveys continue to support a patient central bank at next Wednesday's April 29 decision. CIBC's central bank watch prices roughly a 2% probability of a 25 basis point cut at the meeting, with the overnight rate widely expected to remain at 2.25%. RBC's forecast table holds the BoC flat at 2.25% through the end of 2026. The Canadian dollar's near-term tone continues to be set externally rather than by domestic policy, with USD/CAD gravitating toward and repeatedly finding support at the 1.3642 level.

Fed Watch:

The CME FedWatch tool shows approximately a 95% probability that the Federal Reserve holds rates at 3.75% at the April 29 FOMC meeting. RBC's forecast table projects the Fed funds upper bound flat at 3.75% through the fourth quarter of 2026. Looking further out, Fed funds futures price roughly 50 basis points of total easing by year-end 2026, with consensus centered on one 25 basis point cut before December, though 30 to 40 percent of market participants see no cut this year if core PCE stays above 2.5% and labor data holds up. Warsh's hearing yesterday did not shift this picture, and any policy implications from a new Fed chair will likely take months to surface.

Technical Picture:

Resistance: 1.3728 (RBC's near-term cap and CIBC's preferred re-entry short zone), 1.3799 (secondary resistance), 1.3856 (tertiary), 1.3932 (major resistance that has rejected four consecutive rally attempts since January)
Support: 1.3642 (critical pivot; held for four sessions, a daily close below targets the yearly lows), 1.3526 (first downside target), 1.3482 (subsequent target)
Outlook: RBC's one to three month technical target sits at 1.3750. A daily close below 1.3642 would terminate the corrective rally that began in late January and flip the picture decisively bearish. Failure to reclaim 1.3728 keeps the broader downtrend intact. With the pair trading in a 1.3635 to 1.3695 range per RBC's expected band, today's price action is likely to stay compressed unless a fresh headline breaks the standoff.

Week Ahead:

Next week is the busiest of the month. Six central bank decisions across five currencies and the US Core PCE and GDP double-header will test the current range-bound FX regime. BoC and Fed on Wednesday are both expected to hold, leaving Thursday's BoE, ECB, and US data the most likely catalysts for a range break.

Other Notes:

• UK March CPI reaccelerated to 3.3% year-over-year from 3.0% in February, with monthly inflation at 0.7% versus 0.6% expected. The print breaks the prior disinflationary trend and complicates the Bank of England's setup ahead of next Thursday's meeting.
• US equity indices are opening near all-time highs as strong earnings continue to outweigh geopolitical risk, with the Nasdaq Composite the second-best performing major index since the Iran war began. Countries heavily reliant on crude imports have been the worst performers.