USD/CAD Market Update

Current Level: Low-1.37s (24hr range 1.3643 to 1.3710)

USD/CAD is trading at 1.3699 this morning after running from yesterday's 1.3661 close on a clean bullish reaction to the joint US and Canadian employment cluster. The intraday range is 1.3643 to 1.3710, with the pair extending roughly 40 points off its post-data low and now testing the upper half of RBC's expected 1.3645 to 1.3725 band. Per RBC's strategists, the data have given USD bulls reason to push for further upside, with weaker Canadian data leaving CAD particularly exposed.

Market Overview:

Risk appetite is firm despite the move higher in USD/CAD. Per CIBC, equity markets are trading at record highs, with the Nasdaq Composite posting its eleventh record close in the last thirteen trading days as strong earnings and decent data keep the melt-up alive. Global bond yields are little changed, with Treasury yields inching up at the front of the curve as traders leave Federal Reserve policy expectations broadly intact. The dollar is mixed against the G10 basket, with the Loonie one of the clear underperformers on the soft Canadian print. Oil is broadly flat: per CNBC, Brent is near 100 dollars per barrel and WTI just below 95, with prices little changed after President Trump insisted the US-Iran ceasefire remains in place despite an exchange of fire in the Strait of Hormuz earlier in the week.

Twin Jobs Reports Repriced the Pair:

The 5:30 AM Pacific release delivered the asymmetric outcome that this week's preview reports had flagged as the bullish-USD/CAD scenario. US Non-Farm Payrolls came in at 115K against a 65K consensus, marking the second consecutive month of robust job growth, with the unemployment rate steady at 4.3%. Per RBC, healthcare continues to drive most of the gains while cyclically-exposed sectors remain limited, but trade-exposed industries including manufacturing, transportation, and professional services have added back roughly 29K jobs since January after shedding nearly 380K in 2025. Canadian Employment for April fell 17.7K against a 10K consensus gain, with the unemployment rate climbing to 6.9 percent versus 6.7 percent expected. Per CIBC, full-time employment dropped 46.7K and youth unemployment rose back toward cycle highs of 14.3 percent. The combination drove a clean bullish move in USD/CAD, with the pair clearing the 1.3672 trendline that RBC's technical desk had previously flagged as the rallies-to-sell zone floor.

Iran and the Strait of Hormuz:

The Iran story has receded as a near-term USD/CAD driver but remains live in the background. Per RBC, markets are still awaiting Iran's response to the memorandum of understanding presented by the Trump administration, and the Strait of Hormuz remains closed in the meantime. President Trump described the recent exchange of fire as a minor incident and reaffirmed that the early-April ceasefire remains in effect. Oil's flat tape on the day suggests positioning has reset around the assumption that the diplomatic track holds, but a firm Iranian rejection or a fresh military escalation can flip the cross-asset tone quickly given the proximity to the late-February conflict outbreak.

Canadian Data/Outlook:

Today's employment report points to rising slack in the Canadian labour market and reinforces the Bank of Canada's hold-through-2026 trajectory. Per CIBC's Central Bank Watch, money markets price a 3 percent probability of a 25 basis point hike at the June 10 BoC meeting and 0 percent probability of a cut, unchanged from earlier in the week despite the soft data. Per RBC's strategists, the print reduces some of the BoC hike pricing that had built up further out the curve, with the desk view that the BoC stays on hold through 2026 and the main risk is hikes pushed into H2 2026 only if oil weakens or data softens further. Cuts remain very unlikely on the RBC trajectory. CIBC and RBC both hold the BoC overnight rate flat at 2.25 percent through Q4 2026.

Fed Watch:

Per CIBC's Central Bank Watch, money markets price 0 percent probability of either a hike or a cut at the June 17 FOMC meeting. CME FedWatch readings now show roughly 33 percent probability of a single 25 basis point cut by year-end, down marginally from 36 percent yesterday on the back of the NFP upside surprise, with around 51 percent pricing rates unchanged through December. RBC's published forecast continues to hold the Fed Funds upper bound flat at 3.75 percent through Q4 2026. The May 11 Senate floor vote on Kevin Warsh's confirmation as Fed Chair is a fresh USD-relevant catalyst on the calendar; per CBS News and CNBC, the Banking Committee advanced the nomination 13 to 11 along party lines on April 29, and a successful Senate vote next week would install Warsh before Powell's term expires on May 15.

Technical Picture:

Resistance: 1.3728 is the immediate ceiling, with 1.3800 the next level out if the post-data momentum carries.
Support: 1.3672 is now the nearest support after today's break above the old trendline. 1.3526 is the deeper downside target, marking the 2024 low retest zone.
Outlook: Per RBC's technical desk, the bearish bias from last week's close below 1.3598 has been challenged by today's break of 1.3672. The pair sits in the upper half of RBC's 1.3645 to 1.3725 expected band, with the directional bias now neutral-to-bullish ahead of the May 12 US CPI release.

Week Ahead:

Tuesday's US CPI is the most concentrated single risk for USD/CAD over the next two weeks. A reacceleration in core services inflation paired with a hot headline number would extend today's USD repricing and put 1.3800 on the radar; a soft print would relieve some of the pressure built up by today's payrolls beat and bring 1.3672 back into play as support. The Warsh confirmation vote is a secondary but live USD catalyst given the political dimension and the proximity to Powell's term expiry.

Other Notes:

• UK local elections are still tabulating, with early results showing Nigel Farage's Reform UK making sweeping gains at Labour's expense. Sterling has held firm into the result, but a leadership challenge to Prime Minister Starmer in the months ahead remains a watch item for GBP cross trades.