USD/CAD Market Update

Current Level: Low-1.42s, easing from year-to-date highs (24hr range 1.4201 to 1.4226)

USD/CAD opens the session in the low-1.42s, easing back after nearing its year-to-date highs in overnight trade. The US dollar is marginally firmer against the G10 as geopolitics return to the foreground, but the pair itself has softened, and CIBC notes its daily MACD has flipped bearish for the first time since April. The calendar is light today, with attention building toward Wednesday's FOMC minutes and Friday's Canadian employment report.

Market Overview:

Risk appetite is fragile this morning. Equities are opening lower as a sharp selloff in semiconductors weighs on the broad indices, and global bond yields are slightly higher. The US dollar is marginally stronger against the G10, with geopolitics continuing to support the greenback, according to CIBC. CIBC strategists continue to favour the Canadian dollar at current levels, expecting USD/CAD to trade toward 1.4130 over the coming week and holding a longer-term target of 1.3700 by the fourth quarter of 2026.

Semiconductor Selloff Sours Risk Sentiment:

Equity markets are lower after a sharp selloff in semiconductors led by Samsung. Samsung shares fell more than 10% despite earnings beating expectations, dragging the South Korean KOSPI lower and spilling into the broader chip complex, according to CIBC. The move reflects growing investor concern that valuations tied to artificial intelligence infrastructure have run too far, with markets questioning whether hundreds of billions in planned spending can justify current multiples. CIBC characterises the selloff as more of a valuation reset than the end of the AI cycle, but notes it is a reminder that elevated expectations leave little room for disappointment.

Geopolitics Back in Focus: NATO Summit and the Strait of Hormuz:

With little data on the calendar, geopolitics is driving the narrative. The NATO summit opens today in Ankara, with defence spending in focus as the United States pushes allies toward a target of 5% of GDP, according to CIBC. Markets are watching for signs of unity amid ongoing questions about long-term US commitment to the alliance. In parallel, the US-Iran agreement faces a fresh test after new attacks on vessels near the Strait of Hormuz. Reduced tanker traffic through the strait has pushed oil prices back toward their weekly highs, which in turn is supporting Treasury yields and the US dollar. CIBC frames the combination of NATO developments and Middle East tensions as the main support for oil, yields and the greenback today.

Canadian Data/Outlook:

There is no major Canadian data today, leaving the Canadian dollar to trade off external forces and the firmer US dollar. The next domestic test is Friday's June employment report, where consensus looks for a gain of about 10,000 jobs after May's strong 87,800 increase, with the unemployment rate seen holding at 6.6%. The Bank of Canada meets July 15 and markets price no change in either direction, leaving the policy rate at 2.25%; CIBC's Central Bank Watch shows the implied odds of both a hike and a cut at zero. Soft domestic momentum and a wide rate gap to the United States remain headwinds, though CIBC continues to see current levels as a hedging opportunity for Canadian dollar buyers.

Fed Watch:

The Federal Reserve's next decision is July 29, and markets continue to see the balance of risk tilted toward a hike rather than a cut. CIBC's Central Bank Watch shows a 23% probability of a 25 basis point hike at that meeting and a 0% probability of a cut, leaving a hold as the base case with tightening the only live alternative. Wednesday's release of the June FOMC minutes is the near-term focus and will be read for how seriously officials are weighing renewed inflation risks against a labour market that has cooled toward balance.

Technical Picture:

Resistance: 1.4240, the prior session high, then 1.4248, the year-to-date and 14-month high. A sustained break above would reopen the topside.
Support: 1.4150, then 1.4130, the level CIBC expects to trade over the coming week.
Outlook: CIBC's daily MACD has flipped bearish for the first time since April, suggesting upside momentum is fading. It is not a confirmed trend reversal, but it points to increasing downside risk after the pair's run toward its highs.

Week Ahead:

Wednesday's FOMC minutes and Friday's Canadian jobs report are the key near-term catalysts, with US CPI and the Bank of Canada decision following next week. A soft Canadian employment print would reinforce the case for the Bank of Canada to hold on July 15.

Other Notes:

• Oil is firmer, with prices pushed back toward their weekly highs after fresh attacks on vessels near the Strait of Hormuz reduced tanker traffic, according to CIBC. Firmer crude is a modest support for the Canadian dollar's terms of trade.
• The semiconductor selloff, led by a drop of more than 10% in Samsung, is the session's dominant cross-asset story and is weighing on global risk appetite.
• The NATO summit in Ankara opens today, with allied defence spending toward a 5% of GDP target in focus.