October 28, 2026

USDCAD open (6:00 am): 1.4061, overnight range 1.4041-1.4069, close 1.4011

USDCAD is trading with a modest bid ahead of this morning’s Bank of Canada monetary policy announcement and the FOMC decision this afternoon. The Fed should hike rates but won’t, while the BoC should leave rates unchanged but will hike.

The BoC is widely expected to hike its overnight rate by 25 basis points to 2.75% today. Many analysts and economists believe recent comments by Governor Tiff Macklem argue that an increase is needed, ostensibly as a pre-emptive strike against inflation fuelled by higher oil prices.

The Bank’s own preferred measures of underlying inflation offer little evidence that another rate hike is necessary. September CPI-trim was 1.8% and CPI-median 1.9%, both below the 2% midpoint of the Bank’s inflation target.

After three years of insisting monetary policy is data-dependent, Tiff Macklem and his deputies now appear prepared to act on what might happen rather than what the data says is happening.

Hike: Sell the Fact?

A 25-basis-point hike is widely anticipated and is largely reflected in the price, but USDCAD could still test 1.3960 if Macklem signals that further tightening remains possible.

However, the sell-off may prove short-lived if the Bank characterises the move as insurance against an energy-driven inflation shock rather than the beginning of a sustained tightening cycle.

Hold: An Uncomfortable Surprise

Leaving rates unchanged suggests a USDCAD spike to the 1.4140 area as opportunistic short USDCAD positions get unwound. However, a hawkish hold, with Macklem keeping the door open to a December increase, would limit the damage.

The Outcome

The Canadian economy is already on life support. Higher interest rates do not encourage businesses to increase capex or hire more workers. Higher Canadian interest rates do nothing to support businesses suffering from US trade policies, and they certainly do not help a fragile housing market or households already struggling with debt.

USDCAD Technical Outlook

The intraday USDCAD technicals are cautiously bullish while trading above 1.4040, and 1.4047 which is the 100-day moving average, looking to extend gains to 1.4010.  A drop below 1.4040 will shift the focus back to 1.3990.

Longer term, yesterday’s close at 1.4050 was USDCAD’s first daily close above the 100-day moving average at 1.4048 in a week, and the 38.2% Fibonacci retracement of the January to October rally at 1.3992 has held.

The key level on the upside is the 38.2% Fibonacci retracement of the August to October rally at 1.4081. A daily close above it would confirm a bottom and put 1.4140 in play. On the downside, the 61.8% retracement at 1.3946 remains the line in the sand. A daily close below it would put the 200-day moving average at 1.3886 in play.

For today, USDCAD support is 1.4040 and 1.3990. Resistance is 1.4080 and 1.4110.

FX Heat Map

FX open high low 6:00 am

FOMC is the Main Event

The probability that the Fed leaves its benchmark rate unchanged today is 90.6%. A month ago it was just 29.1%. That’s a rather big swing, which just means even the “smartest guys in the room” are struggling to understand how to assess the economy. That task is made increasingly difficult by an erratic administration that dictates policy by executive order and Truth Social.

Coming Soon: America’s Next “4 Weeks or Less” Iran War

Trump has a plan. The Wall Street Journal reports that the US has advised several Gulf Arab states to prepare for a “short, intense military campaign” following the US midterm elections. Trump fears an attack before November 3 would cost his party votes by highlighting his administration’s bungling of the war, an effort the Pentagon estimates has cost $47 billion to date.

The news underpinned oil prices, with WTI rising from $99.76 to $102.24. Trump told a rally in Texas that higher gas prices were “short-term pain for long-term gain.” The US is getting a delivery of 1 million barrels of oil “at no cost” from Venezuela, apparently in appreciation of Trump’s efforts to steal that country’s oil reserves.

Taking Stock

Asian markets closed flat to higher. Japan’s Topix and Australia’s ASX 200 finished unchanged while Hong Kong’s Hang Seng rose 0.23%.

As of 4:10 am PT, the CAC 40 and the German DAX are flat while the UK FTSE 100 is down 0.24%. S&P 500 futures are up 0.14%, the US 10-year yield is 5.003%, the DXY is 102.42 and gold (XAUUSD) is at $4,045.48.

EURUSD | Range 1.1113-1.1132

EURUSD is lower and on track for its worst October among the majors due to high energy costs and French fiscal jitters. Traders are awaiting today’s FOMC decision and then the ECB on Thursday.

GBPUSD | Range 1.3272-1.3312

Sterling is a touch softer at 1.3287 ahead of Chancellor Healey’s first budget at 8:30 am ET, which will include an increase in bank taxes and defence spending. However, the risk of a hawkish Fed hold is also weighing on GBPUSD.

USDJPY | Range 157.66-158.04

USDJPY drifted to the low end of its range as officials keep the intervention threat alive. The BoJ meets Friday and is expected to hold, while suggesting a December move is likely.

AUDUSD | Range 0.7023-0.7055

AUDUSD had a choppy session, peaking in Asia before dropping to the low into the New York open. The rally was triggered by a hotter-than-expected inflation report. Q3 CPI jumped 1.3% q/q from 0.6%, while the trimmed was 3.6%y/y. Governor Bullock said the board will debate next week whether four hikes this year are enough.

USDMXN | Range 18.6442-18.7019

USDMXN traded sideways as it consolidated yesterday’s gains. Traders were sidelined awaiting today’s FOMC decision. USDMXN is also underpinned by ongoing uncertainty around the US and Mexico trade talks.

CHINA

PBoC Fix   6.7165 vs exp. 6.6734 (prev. 6.7171)

Shanghai Shenzhen CSI 300 rose 0.85% to 4,083.87

Sources: Investing.com, Newsquawk, Associated Press, FXStreet, investingLive, Tradingpedia, Business Recorder, TradingView