The Canadian Dollar (CAD) has remained relatively stable. Bank of Canada (BoC) Governor Macklem’s recent comments on tariffs and monetary policy suggest the bank’s concern regarding trade-related inflation.
Market expectations for interest rate adjustments have not shifted, with swaps indicating approximately an 80% likelihood of a 25-basis-point cut by June. The US Dollar’s recent inability to rise suggests a potential cap on price movements.
Key Support And Resistance Levels
The USD closed below the resistance level of 1.4340/50, with a key support level at 1.4300/10. A breach of this support could result in a retreat to the low/mid-1.42s.
What we see here is a currency holding its ground while policymakers express concerns about external risks affecting prices. Macklem’s remarks indicate that trade restrictions could add inflationary pressure, something central banks tend to monitor closely when setting rates.
At the moment, derivatives pricing suggests traders are largely convinced a cut is coming within the next few weeks, with around an 80% probability reflected in swaps markets. That level of confidence means most players have positioned themselves accordingly, so any shifts in expectations could trigger abrupt adjustments. If incoming data or statements from policymakers suggest less urgency to lower borrowing costs, we could see unwinding of those bets, pressuring short-term rates higher.
Recent movements in the US Dollar provide another piece of the puzzle. The currency has lost momentum, failing to break key resistance, a sign that upside potential might be capped for now. Without fresh drivers to lift it, the tendency has been to respect technical boundaries.
Market Reactions And Future Outlook
The 1.4340/50 resistance remains a barrier. At the same time, attention is set on 1.4300/10 as a critical support zone. Traders watching these levels must consider how price reacts, as a clear break lower could lead to a retreat towards the 1.42 range.
In the coming sessions, price action at those thresholds will be telling. If sellers gain the upper hand and drive price below support, momentum may accelerate downward. On the other hand, a bounce could reinforce stability, keeping movements confined within the current range.
We will be keeping an eye on fresh comments from policymakers, as well as any surprises from macroeconomic data, which could challenge existing assumptions in markets. The balance of expectations remains delicate, making well-timed decisions essential.
