USD/CAD Market Update

Current Level: Low-1.40s (24hr range 1.3990 to 1.4021)

USD/CAD is trading near 1.4017 this morning, essentially unchanged from Wednesday's close of 1.4011, after an overnight dip to 1.3990 was bought. That low matches the July 30 trough exactly and marks the weakest the pair has traded since late June. The narrow session range reflects a market unwilling to commit before tomorrow's twin employment reports, which land simultaneously at 5:30 a.m. Pacific.

Market Overview:

Risk appetite is mixed this morning. CIBC reports investors taking a breather after the recent artificial intelligence led rally, with most major indices close to flat but semiconductors under heavy pressure. Global bond yields are modestly higher, and CIBC notes the US 10 year Treasury yield reaching 4.50% ahead of the data. The US dollar is mixed against the G10 basket rather than directionally weak, as traders decline to take large positions into tomorrow's release. Overnight news flow was otherwise light, leaving rates, currencies and equities rangebound across most major markets.

Hormuz Deal Agreed in Principle:

Iran said on Thursday that its agreement with Oman on a Strait of Hormuz shipping route has been reached in principle, according to Bloomberg. The two sides settled the coordinates of the proposed commercial routes on Wednesday after several rounds of negotiation, and a joint statement from Tehran and Muscat is in final drafting. Al Jazeera reports the talks covered the technical, legal, security and environmental aspects of the corridor, and that the remaining sticking point has shifted from whether ships pass immediately to what happens once an initial 60 day period expires. An earlier memorandum with Washington that would have allowed free passage for 60 days collapsed last month over which routes vessels should take. No joint statement has been published yet. CIBC's read is that Middle East headlines are fading into the background for now, and energy markets are behaving consistently with that: crude is holding the ground it lost in last week's selloff rather than extending the move.

Memory Chips Drag Seoul Sharply Lower:

South Korea's KOSPI fell 4.37% overnight in a broad memory chip selloff, with SK Hynix down 8.27% and Samsung Electronics down 5.69%, according to KED Global. The trigger was SanDisk's fiscal fourth quarter report. Revenue rose 372% from a year earlier to US$8.96 billion, but guidance for the current quarter of US$10.3 billion to US$10.8 billion fell short of the roughly US$10.8 billion the market expected, and the shares fell more than 8% after hours. Western Digital reported the same day and sold off alongside it. CIBC's observation is the useful one: when a stock stops rising on good news, the marginal buyer is probably exhausted, which says more about positioning than about the underlying business. Goldman Sachs and JPMorgan both maintained buy ratings on the Korean names, arguing that forward price to earnings multiples near 3.5 times look detached from fundamentals, per TradingKey.

Gold Clears US$4,300 as Crude Holds Near Its Lows:

Gold December futures opened at US$4,307 per ounce on Thursday, the first print above US$4,300 since June 17, according to CNBC and Yahoo Finance, with spot trading between roughly US$4,252 and US$4,278 through the morning. Yahoo Finance attributes the move to progress on reopening the Strait of Hormuz alongside Wednesday's soft ADP employment data, which markets read as reducing the odds of a Federal Reserve hike. CIBC's technicians are watching whether this clears a year long consolidation that formed after last year's rally, while cautioning that a single session is not a trend and that overhead supply remains substantial. Crude is the more direct input for the Canadian dollar, and it is quiet: WTI is near US$75.79 per barrel and Brent reached US$83.64 in early New York trade, per Fortune, with both sitting close to the lows established during last week's selloff. The absence of an energy tailwind leaves the Canadian dollar dependent on tomorrow's data.

Canadian Data/Outlook:

The July employment report lands tomorrow at 5:30 a.m. Pacific, at the same moment as the US release. Consensus looks for a gain of 17,800 jobs after June's 18,200, with the unemployment rate steady at 6.5%. CIBC strategists see downside risks to the Canadian numbers and expect that to leave the Canadian dollar underperforming on the crosses. The Bank of Canada has held its policy rate at 2.25% for six consecutive announcements, and CIBC's central bank watch now shows a 5% implied probability of a hike at the September 2 meeting, up from 2% on Wednesday and 1% on Tuesday, with no cut priced. The absolute level is negligible, but the drift has been one directional all week.

Fed Watch:

The next decision lands September 16. CIBC's central bank watch puts the implied probability of a quarter point hike at that meeting at 59%, up from 57% on Wednesday, with no cut priced. CME FedWatch data reported by KuCoin had the September hike probability closer to 62% earlier this week. Wednesday's ADP report is the complication: private companies added 44,000 jobs in July against a Dow Jones consensus of 75,000, the smallest monthly gain of 2026, according to CNBC. Services added 47,000 positions while goods producing employment fell 3,000. Tomorrow's official report is expected to show payrolls up roughly 85,000 after June's 57,000 gain, with a Dow Jones poll of economists at 83,000, the unemployment rate steady at 4.2% and average hourly earnings up 0.3% on the month. CIBC's framing is straightforward: a strong number keeps a September hike alive, and a weak one does not. Pricing has already fallen a long way from the roughly 82% probability seen immediately after last month's statement, so the risk looks asymmetric toward a further unwind on a soft print.

Technical Picture:

Resistance: 1.4021, today's high and a narrow cap in a 31 pip session; above that, 1.4082, which has turned the pair back on three separate occasions since July 30.
Support: 1.3990, the overnight low, matching the July 30 trough and the lowest level of the past six weeks; below that, CIBC flags 1.3950 as the level that would open a 1.3800 to 1.3950 range.
Outlook: The 1.3990 area has now held twice, and each defence has been shallower than the last, which argues the level is being worn down rather than respected. CIBC's stated condition for the next leg is explicit: if nonfarm payrolls also surprise to the downside, it would look for a break through 1.3950 and a 1.3800 to 1.3950 range in the coming months. A firm US print does the opposite and puts 1.4082 back in play. With both releases at the same minute, expect a sharp initial move rather than an orderly one.

Week Ahead:

Tomorrow is the only genuinely market moving item in this window. Both the Bank of Canada and the Federal Reserve meet outside the two week horizon, on September 2 and September 16 respectively, so the July employment reports and then the August 12 US CPI release have to carry the rate debate for the next several weeks. That concentration is part of why positioning has stayed so light.

Other Notes:

• CIBC published updated five bank forecasts for the Canadian dollar, the euro and sterling. Four of the five Canadian banks expect USD/CAD to be lower six months from now. The individual revisions are small, but a softer US dollar remains the consensus trade despite the ongoing debate over tariffs, growth and Bank of Canada policy.
• The US 10 year Treasury yield reached 4.50% this morning ahead of tomorrow's data, per CIBC, with global yields modestly higher across the board.