Market Analysis on USD and CAD
USD:
The US dollar has regained some strength at the beginning of the week, primarily driven by the ongoing US-Iran impasse, which has pushed oil prices back into triple digits. This geopolitical tension is unlikely to resolve soon, as former President Trump has dismissed Iran’s proposal to first reopen the Strait of Hormuz before engaging in nuclear discussions. With US stock indices reaching all-time highs, Trump may feel little incentive to compromise.
This environment could set the stage for a renewed rally in the US dollar, particularly if the Strait of Hormuz remains closed and oil prices remain elevated. Such a scenario would likely compel the Federal Reserve to consider an interest rate hike in the coming months. Today’s FOMC policy decision is critical; while the Fed is expected to keep its stance unchanged amid the uncertainties surrounding US-Iran relations, there exists a risk of a more hawkish tone, given the robust performance of US economic data. A neutral outcome should result in minimal market volatility, but a shift towards a hawkish bias could provide the greenback with a significant boost.
CAD:
The Canadian dollar (CAD) has managed to recover all losses incurred due to the ramifications of the US-Iran conflict as bullish sentiment surrounding the US dollar wanes. However, several risks loom over the CAD, ranging from a potential hawkish shift from the Bank of Canada (BoC) against a backdrop of a sluggish economy, to ongoing renegotiations under the Canada-United States-Mexico Agreement (CUSMA).
Today’s BoC policy decision is anticipated to maintain the current rate at 2.25%, with central bank officials likely adopting a “wait and see” approach amid their cautious outlook. The BoC is also set to release updated economic forecasts, which are expected to reflect upward adjustments in inflation estimates alongside downward revisions for growth, in line with trends observed among other central banks. Given this context, the announcement is unlikely to introduce significant volatility, as the central bank is expected to emphasize its data-dependency without committing to a specific rate trajectory.
Currently, the markets are pricing in a potential rate hike in Q4 of 2026, positioning traders to closely observe any shifts in tone or communication from the BoC that may hint at an earlier policy adjustment or a strong counter to the current market pricing.
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Analyzing the daily chart for the USDCAD reveals a consolidation phase occurring between two significant zones. If the pair experiences a pullback toward the resistance level around 1.3750, sellers may emerge, positioning themselves with defined risk above this level, anticipating a decline toward the support at 1.3550. Conversely, bullish traders will look for a break above this resistance to facilitate a rally towards the 1.39 handle.
USDCAD Technical Analysis – 4 Hour Timeframe
On the four-hour chart, a prominent downward trendline is delineating the current bearish momentum. Sellers are likely to continue testing this trendline, utilizing a defined risk above it to pursue further lows. Meanwhile, buyers will watch for a breakout that could extend the corrective move towards the 1.3750 resistance zone.
USDCAD Technical Analysis – 1 Hour Timeframe
Examining the one-hour chart, a minor upward trendline is identified, guiding the ongoing pullback. Buyers may find an advantageous risk-reward setup near this trendline, aiming for a rally towards resistance. However, sellers will be vigilant for a break below this line, increasing their bearish positions with the target set towards the 1.3550 support level. The red lines delineate the average daily range expected for today.
Significant Upcoming Economic Events
Today’s key events include both the BoC and FOMC policy decisions. Looking ahead, tomorrow will feature important economic data releases, including Canada’s monthly GDP results, US Q1 GDP figures, the Employment Cost Index, and the latest jobless claims data from the US. The week will wrap up on Friday with the US ISM Manufacturing PMI, a critical indicator for assessing the health of the manufacturing sector.