Key Moments:
- The US Dollar weakened broadly after reports that the US Department of Justice subpoenaed the Federal Reserve over its headquarters renovation.
- USDCAD climbed toward 1.39 before pulling back, as sellers defended resistance and targeted a move toward 1.38.
- Traders are now focused on US CPI, Retail Sales, PPI, Jobless Claims, and a potential Supreme Court ruling on Trump’s tariffs.
Fundamental Overview – USD
The US Dollar fell against major currencies after reports surfaced that the Department of Justice subpoenaed the Federal Reserve. This action intensified tensions between President Trump and Fed Chair Jerome Powell over the pace of interest rate cuts.
Specifically, the Justice Department is reviewing the Federal Reserve’s headquarters renovation. The probe focuses on whether Powell gave misleading testimony to the Senate Banking Committee regarding costs, scope, and luxury features.
Many market participants view the move as political pressure aimed at pushing the Fed toward faster rate cuts. Previously, Trump applied similar pressure to Fed Governor Cook. That effort failed, and a related Supreme Court ruling remains pending.
As a result, the Dollar sold off as investors worried about potential threats to Fed independence. Such erosion could raise inflation risks and weaken the currency. Nonetheless, markets see a full loss of independence as unlikely due to severe economic consequences.
Meanwhile, attention shifts to the upcoming US CPI release. Strong inflation data would likely push rate expectations higher and support the Dollar. By contrast, softer data would reinforce expectations for at least two rate cuts by year-end. Overall, the USD outlook remains neutral to bearish.
Fundamental Overview – CAD
On the Canadian side, Friday’s labor market report failed to shift expectations for the Bank of Canada. Although employment growth beat forecasts, wage gains slowed and unemployment rose alongside higher participation.
Overall, the data painted a balanced picture. Therefore, policymakers saw no reason to adjust their stance. At its latest meeting, the BoC left rates unchanged and avoided endorsing expectations for further tightening.
In addition, Canadian inflation data showed the Trimmed Mean rate easing to 2.8% year on year. This reading came below both consensus and the prior print. As a result, markets made a modestly dovish adjustment to rate expectations.
Traders now price just 11 basis points of tightening by year-end. Consequently, the outlook for the Canadian Dollar stands neutral to bullish.
USDCAD – Daily Chart Technical Picture
On the daily chart, USDCAD rallied toward 1.39 before reversing after the DOJ headlines. Sellers defended the 1.39 resistance area and positioned for a move lower.
From a bullish angle, buyers may find better risk-reward conditions near 1.38 support. From there, price could attempt another push toward the 1.41 region.
| Timeframe | Key Levels / Structures | Bias & Trading Focus |
|---|---|---|
| Daily | Resistance at 1.39; support near 1.38; upside target at 1.41 | Sellers defend 1.39; buyers favor longs closer to 1.38 |
| 4-hour | Rising trendline supports the move higher | Buyers lean on trendline; sellers watch for a downside break |
| 1-hour | Major uptrend with a minor downward counter-trend | Buyers seek breaks higher; sellers press near the counter-trendline |
USDCAD – 4-Hour Chart Technical View
On the 4-hour timeframe, a rising trendline continues to guide the bullish structure. Buyers are likely to defend this area and place stops just below it.
However, sellers will look for a clean break beneath the trendline. If that occurs, attention would shift toward the 1.38 support zone.
USDCAD – 1-Hour Chart Short-Term Structure
The 1-hour chart highlights the current pullback. A minor downward trendline tracks the correction toward the main bullish trendline.
Buyers may step in closer to the primary trendline. A break above the minor counter-trendline could trigger fresh long entries. Meanwhile, sellers continue to lean against resistance to force a deeper move lower.
Upcoming Market Catalysts
Several near-term events could shape USDCAD and broader FX markets:
- Tuesday: US CPI report.
- Wednesday: US Retail Sales and US PPI data.
- Potential US Supreme Court decision on Trump’s tariffs.
- Thursday: Weekly US Jobless Claims.
Together, these releases will influence rate expectations and risk sentiment. As a result, they may drive the next directional move in both USD and CAD.
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