The Canadian Dollar (CAD) displayed resilience amid tariffs and a rate cut from the Bank of Canada (BoC). The BoC is hesitant about providing a clear policy outlook due to uncertainties surrounding growth and inflation.
The CAD benefits from a narrowing in US/Canada term spreads, even with the challenges posed by tariffs. Currently, USDCAD is trading well above its fair value estimate, indicating that the USD is notably overvalued.
Potential Bearish Movement For The USD
Additionally, trends suggest potential bearish movement for the USD, with resistance forming in the low/mid 1.45 region. Support remains at 1.4350, suggesting limited short-term gains for the CAD around 1.42.
The AUD/USD pair fell below 0.6300 due to a stronger US Dollar and concerns about tariffs. In the EUR/USD market, the pair retreated to the 1.0820 level, impacted by US Dollar recovery and German yield declines.
Gold reached new heights above $2,980 per troy ounce as global growth concerns intensified demand for safe havens.
Given the resilience of the Canadian Dollar even after tariffs and the rate cut, it is evident that the narrowing yield gap between the US and Canada continues to lend support. That said, the reluctance of the central bank to commit to a forward-looking stance reflects broader economic uncertainty. Growth remains in question, and inflation trends are not yet offering a clear direction.
With the USD trading at a level well above fair value, pressure is mounting for a downward move. In fact, current positioning suggests that weakness in the USD may persist, particularly as technical resistance appears firm in the low-to-mid 1.45 region. On the downside, there is a noted floor around the 1.4350 level, though strength in the Canadian Dollar seems relatively contained near 1.42 for now.
Weakness In The Australian Dollar
Elsewhere, the decline in the Australian Dollar below 0.6300 highlights how USD strength continues to weigh on risk-sensitive currencies. The added pressure from tariff concerns only exacerbates the situation, keeping sentiment in check. The Euro has also struggled, with the EUR/USD pair sliding toward 1.0820. A combination of a rebounding US Dollar and a drop in German yields has suppressed its ability to recover, reinforcing the fragile environment for the common currency.
Meanwhile, gold has pushed past $2,980 per troy ounce as global economic worries fuel demand for safe-haven assets. The metal’s continued rise aligns with broader concerns about slowing growth, prompting a steady bid from investors seeking stability.
