USDCAD Tests Resistance; Geopolitics, Jobs Data Drive

The US dollar sold off after Trump announced a two-week ceasefire, but subsequent Israeli attacks against Lebanon introduced uncertainty, keeping markets in check. Iran has refrained from retaliating ahead of the peace talks, which are critical as a breakdown creates strong market distress and leads to a global recession.

A peace deal weighs on the greenback amid renewed rate cut bets, while a breakdown of negotiations gives the dollar another boost, pushing it into new highs. On the Canadian side, economic data has consistently surprised to the downside, yet the market prices in 36 basis points of tightening by year-end for the Bank of Canada (BoC) due to the US-Iran conflict and elevated energy prices.

The BoC maintains a neutral stance, preferring to keep rates steady unless the war ends and demand boosts the economy. Technically, USDCAD broke below an upward trendline on the daily chart, with a resistance zone around 1.3870 on the 4-hour chart, where sellers step in.

Upcoming catalysts include Canadian Employment data, US CPI, and the University of Michigan Consumer Sentiment survey.