The Canadian Dollar (CAD) is performing well today, recovering from a decline caused by recent tariff news and trading in the low 1.44 range. The softer US Dollar (USD) is supporting this recovery, coupled with a decrease in short-term volatility.
Recent weeks have seen the CAD incorporate tariff risks, though the current price action suggests scepticism towards the longevity of 25% tariffs. Meanwhile, US/Canada 2Y spreads have narrowed by approximately 20 basis points, providing some support to the CAD amid tariff concerns.
Cad Upside Potential
Currently, CAD upside potential is confined to the 1.4350/1.44 range. USD support levels are at 1.4370 and 1.4344, while resistance is at 1.4550 and 1.48. Spot losses below these supports may indicate a move towards the mid-1.42s.
The Canadian Dollar appears to have steadied, having absorbed the concerns around tariffs over the past few weeks. Markets seem hesitant to fully price in long-term economic effects from the 25% tariff discussion, which has kept the currency from weakening further. With the USD itself losing momentum, the balance seems to favour a measured CAD recovery rather than a sharp move in either direction.
From a rate differential perspective, the compression of US-Canada two-year spreads by around 20 basis points seemingly adds a degree of support. However, this movement alone is unlikely to drive sustained CAD strength unless further developments reinforce the shift. We note that lower volatility is playing a role in the currency pair’s relatively contained movement, suggesting a more orderly trading range rather than erratic price action.
Key Technical Levels
Current technical levels frame the near-term potential. As it stands, gains for the CAD seem restricted within the 1.4350 to 1.44 corridor. Should the USD side weaken further, the next inflection points sit at 1.4370 and 1.4344, both acting as interim supports. A breach below these could pave the way toward the mid-1.42s, though traders may require additional conviction from economic data or policy signals before committing to this trajectory.
On the other hand, upward pressure on USD would likely encounter barriers at 1.4550 and further at 1.48. Should momentum shift in that direction, it would suggest a reassessment of the tariff narrative or broader USD strength resurfacing. For now, with spreads where they are and volatility contained, attention remains on whether external forces—such as Federal Reserve guidance or trade developments—adjust the prevailing range.
