USD/CAD Market Update

Current Level: Low-1.36s (24hr range 1.3598–1.3679)

USD/CAD is trading in the low-1.36s at 1.3604 this morning, roughly 74 pips softer than Friday's 1.3678 close and well below RBC's expected 1.3575 to 1.3645 trading range. Today's session printed a low of 1.3598, the first sub-1.36 reading of the cycle, and the close confirms RBC's break-trigger for a target reset toward 1.3500. The technical break has arrived 48 hours ahead of back-to-back Bank of Canada and Federal Reserve decisions, raising the stakes for Wednesday's statement language.

Market Overview:

Risk appetite is mixed this morning, with equity futures opening flat as positioning shifts to a heavy week of central bank decisions and corporate earnings. The US dollar is broadly weaker against the G10 basket, with RBC's spot desk noting an ongoing bias to sell USD on rallies despite the absence of a parallel risk-on signal in other asset classes. Global bond yields are marginally higher with no major moves. WTI is trading near $96 per barrel, up roughly 1.5 to 2 percent on the day on continued Strait of Hormuz supply concerns, but the higher oil print is no longer translating into a USD bid as it did earlier in the conflict.

Technical Break Confirms Bearish Reversal:

The 1.3645 to 1.3650 support zone that defended the pair through six consecutive sessions last week has given way. RBC characterizes the move as the end of the corrective rally that began in late January, with the daily close below trendline support confirming a bearish trend reversal. CIBC's strategists target USD/CAD at 1.3500 by Q2 and remain sellers of any near-term rallies into the BoC and Fed cluster. With the break now in, former support at 1.3650 becomes initial resistance, and the focus shifts to the year's lows at 1.3526 and 1.3482 as the next downside targets. Per RBC, a daily close below 1.3650 also opens a longer-term path toward the September 2024 low at 1.3420.

Iran Stalemate, New Mediation Channel:

The US-Iran impasse remains unresolved, with the US naval blockade of Iranian ports still in force and the Strait of Hormuz effectively closed to commercial traffic. Iranian Foreign Minister Abbas Araghchi traveled to Russia for discussions with President Putin following allegations that joint US-Israeli military operations disrupted earlier diplomacy. Per RBC, sources suggest Tehran may be prepared to reopen the Strait if Washington ends its blockade, with nuclear talks deferred to a later phase. Separately, Iran has reportedly submitted a new proposal to the US via Pakistani mediators that would extend the ceasefire and postpone nuclear talks until the blockade is lifted, the first concrete diplomatic channel to surface in two weeks. The dollar declined on the news.

Canadian Data/Outlook:

The week's main domestic release is Thursday's February GDP print, with CIBC's economists looking for an inline read driven by a rebound in manufacturing and continued strength in mining, oil and gas, with real estate still a drag. CIBC expects modest growth in March, leaving Q1 GDP tracking around 1.8 percent annualized. The data should keep the Bank of Canada comfortably in wait-and-see mode ahead of Wednesday's hold. A Reuters poll conducted April 21 to 24 showed all 41 surveyed economists expect the BoC to hold at 2.25 percent on April 29, and prediction-market contracts on the no-change outcome are pricing 96.5 percent. More than 80 percent of polled economists expect the BoC to hold throughout 2026. RBC's forecast table likewise holds the overnight rate flat at 2.25 percent through Q4 2026. Wednesday's announcement also includes the quarterly Monetary Policy Report, which will frame the bank's revised inflation and output projections for the rest of the year.

Fed Watch:

The Federal Reserve is widely anticipated to leave rates on hold at 3.75 percent at Wednesday's FOMC meeting. CIBC's Central Bank Watch prices a 1 percent probability of a hike and 0 percent for a cut at the meeting, and CIBC's strategists flag that current market expectations lean hawkish, opening the risk that dovish statement language drives a weaker USD. CME FedWatch shows a roughly 51 percent probability of no change at the December 2026 meeting and approximately 36 percent probability of one 25 basis point cut by year-end, with two-cut odds compressed to under 10 percent as elevated oil prices complicate the disinflation path. RBC's forecast table holds the Fed funds upper bound flat at 3.75 percent through Q4 2026. The key forward question for Wednesday is whether Chair Powell's press conference language acknowledges the inflation risk from sustained Hormuz-driven energy pressure, which would reinforce the no-cut path that markets are increasingly aligned on.

Technical Picture:

Resistance: 1.3650 (former support, now initial resistance per RBC; rallies to this level viewed as selling opportunities), 1.3728 (secondary), 1.3799 (tertiary, CIBC's preferred re-entry short zone), 1.3932 (major; has rejected four consecutive rallies since January and must close above to turn the outlook bullish)
Support: 1.3526 (first downside target, year-to-date low), 1.3482 (subsequent year-to-date low), 1.3420 (September 2024 low and RBC's next target on a sustained break)
Outlook: RBC's one to three month technical target adjusts toward 1.3500 with the confirmed close below 1.3650. The corrective rally since late January is ending, and the path of least resistance now sits to the downside until proven otherwise. CIBC continues to target 1.3500 by Q2 and views any near-term bounce into the 1.37 zone as a fresh selling opportunity. With the BoC and Fed back-to-back on Wednesday, an outsized statement reaction is the most plausible catalyst for either a sharper extension lower or a counter-trend bounce.

Week Ahead:

Five central bank decisions and the US Core PCE and GDP cluster make this the highest-information week of the month for rates and FX. Wednesday's BoC and Fed back-to-back are both expected to hold, leaving the directional read to statement language and the BoC's MPR projections. Thursday's BoE, ECB, and US data layer adds the most plausible catalysts for a range break in either direction.

Other Notes:

• Iran has reportedly submitted a new proposal to the US via Pakistani mediators that would extend the ceasefire and postpone nuclear talks until the US blockade of the Strait of Hormuz is lifted, the first concrete diplomatic channel to surface in two weeks.
• RBC characterizes today's price action as ending the corrective rally since late January, flipping the broader trend bias decisively bearish. Counter-trend bounces into the 1.3650 to 1.3728 zone now viewed as selling opportunities.
• Per RBC, CUSMA renegotiation cooperation deepens. PM Mark Carney and Mexican President Claudia Sheinbaum agreed to enhanced partnerships across critical minerals, clean technology, energy, and advanced manufacturing. Mexico has set its initial US trade negotiation round for May 25; Canada's timeline remains unset.