USD/CAD pulls back into a major trendline ahead of the BoC and Fed decisions. What's next?
The desk believes that USD/CAD is poised for a potential rally, especially as the market anticipates the outcomes of both the BoC and FOMC meetings. Per the full note source, the US dollar has regained strength due to geopolitical tensions affecting oil prices, which could compel the Fed to adopt a more hawkish stance. With the BoC likely to maintain its cautious approach, the CAD may struggle to gain traction. The consensus target for USD/CAD sits at 1.075, with significant events on the calendar that could influence market dynamics.
What the desk is arguing
The desk posits that USD/CAD is at a critical juncture, with the potential for a bullish reversal given the current geopolitical landscape and upcoming central bank decisions. Per the full note source, the US dollar's recent strength is attributed to rising oil prices driven by the US-Iran stalemate, which may pressure the Fed to consider rate hikes sooner than anticipated.
The desk highlights that the Fed's decision today is crucial, as a more hawkish tone could further bolster the dollar. Current market sentiment indicates that traders are closely monitoring the Fed's communication, especially in light of resilient US economic data.
Where it sits in our coverage
Our consensus target for USD/CAD is 1.075, with a range from 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This view aligns with jpmorgan, which anticipates a stronger USD, while bofa diverges with a more bearish outlook, placing their target at the lower end of the spectrum.
How other firms see it
Firms like jpmorgan and citi are aligned with the desk's bullish perspective on USD/CAD, citing similar concerns over inflation and central bank responses. Conversely, bofa and hsbc maintain a more cautious stance, suggesting that the CAD could outperform if oil prices stabilize.
Traders should also keep an eye on the USD/JPY dynamics, as shifts in US monetary policy could have spillover effects on this pair, particularly given the Bank of Japan's current stance on interest rates.
What the calendar says
With the BoC and FOMC policy decisions scheduled for today, market participants are bracing for potential volatility. Additionally, upcoming economic releases such as Canada's GDP and US employment data will further shape the outlook for USD/CAD.
Key takeaways
- 01USD/CAD poised for potential rally amid geopolitical tensions
- 02FOMC decision today could influence USD strength
- 03BoC expected to maintain cautious stance
- 04Market consensus target for USD/CAD is 1.075
Market implications
Traders should watch the 1.3750 resistance level closely; a break above could signal a rally towards 1.39. The outcomes of today's BoC and FOMC meetings will be pivotal in determining the next directional move.
USD/CAD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Scotiabank | Bullish | 1.40 |
Bank of America | Bullish | 1.35 |
UBS | Bullish | 1.34 |
FUNDAMENTAL OVERVIEW USD: The US dollar regained some ground to start the week as the prolonged US-Iran stalemate has taken oil prices back into triple digit levels. That looks unlikely to change anytime soon as Trump has rejected Iran’s proposal to first open the Strait of Hormuz and then hold nuclear talks. Unfortunately, with US stock prices at all-time highs Trump might not feel any pressure to concede.
This might even set the stage for the next US dollar rally if the Strait of Hormuz remains closed for much longer and oil prices stay elevated, thus forcing the Fed to hike interest rates in the coming months. Today, we have the FOMC policy decision and although the Fed is expected to keep everything unchanged amid the US-Iran uncertainty, there’s a risk of a more hawkish leaning due to resilient US data and a longer than expected US-Iran war. A neutral Fed shouldn’t bring much volatility, but a more hawkish one could give the greenback a boost.
CAD: On the CAD side, the currency has erased all US-Iran war losses as the bullish US dollar bets got unwound. Looking ahead, there are several risks for the CAD ranging from a hawkish BoC amid sluggish economy and the CUSMA renegotiations. Today, we have the BoC policy decision where the central bank is widely expected to keep the policy rate unchanged at 2.25%.
The central bank will likely maintain a cautious stance and a "wait and see" approach. The BoC will also release new economic forecasts which are expected to mirror the other central banks' outlooks, with upward revision for inflation and downward revision for growth. All in all, the decision is unlikely to bring much volatility as the central bank will likely stress data-dependency and avoid pre-committing to any rate path.
The market is pricing in a rate hike in the fourth quarter of 2026, so traders will focus on any change in tone and communication that could point to an earlier than expected rate hike or a strong pushback against market's pricing. USDCAD TECHNICAL ANALYSIS – DAILY TIMEFRAME On the daily chart, we can see that USDCAD is consolidating right between the two major zones. If we get a pullback into the resistance zone around the 1.3750 level, we can expect the sellers to step in with a defined risk above it to position for a drop into the 1.3550 support.
The buyers, on the other hand, will look for a break to open the door for a rally into the 1.39 handle next. USDCAD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME On the 4 hour chart, we have a major downward trendline defining the bearish momentum. The sellers will likely continue to lean on the trendline with a defined risk above it to keep pushing into new lows.
Sources & References
How we cover this story
Cross-firm research
USD/CAD Week of Aug 8 2026: Spot at 1.3940, Consensus at 1.35
USD/CAD trades at 1.3940, roughly 3.26% above the 25-firm Dec-2026 median of 1.35, with a 0.11 spread separating Citi from Deutsche Bank.
USD/CAD Consensus Check: Spot at 1.4018 vs 1.35 Target, Week of Aug 7 2026
USD/CAD trades at 1.4018, roughly 3.84% above the 25-firm Dec-26 median of 1.35, with a 0.11 range separating the most and least bearish desks.
USD/CAD Consensus Check: Spot at 1.3997 vs 1.35 Target, Week of August 6, 2026
USD/CAD trades at 1.3997, roughly 3.68% above the 25-firm Dec-2026 consensus median of 1.35, with a 0.11 dispersion range signalling meaningful disagreement on the policy gap.