May 16, 2025
USDCAD: open 1.3962, overnight range 1.3935-1.3969, close 1.3960
Oh Canada, It’s the annual Victoria Day long weekend, despite the event occurring well-before what has become known as the May 2-4 weekend.
It is amazing that the holiday has survived. Toronto’s Ryerson University was forced to change its name to Toronto Metropolitan University, a statue of the founder of Halifax was removed, and statues of Canada’s first Prime Minister, Sir John A MacDonald were removed from numerous Canadian cities. All these changes were made by virtue-signalling politicians after a very vocal, but very small contingent of latte-slurping, Instagram posing revisionists demanded the action. However, Queen Victoria’s holiday was left alone even though she was the one in charge.
USDCAD is trading somewhat defensively inside yesterday’s range with direction determined by broad-US dollar moves vs the major currencies. However, the downside remains limited as long as the Canada/US tariff situation remains unresolved.
WTI oil prices traded in a 61.28-62.35 range and remain under pressure thanks to the latest US threat prevent chip sales to more Chinese companies.
USDCAD will be sticky in a 1.3945-1.4000 range until 10 am due to some chunky option strikes rolling off. There are reportedly $926 million of 1.3945-50 strikes, $1.8 billion of 1.3975-80 strikes, and $2.5 billion of 1.4000 strikes that mature.
The Michigan Consumer Sentiment survey is due with the headline number expected to rise to 5.34 from 52.2. In addition, housing starts, building permits and the export import price index are on tap.
USDCAD Technicals
USDCAD is trading around 1.3959, having pulled back after testing resistance near 1.4005. Price failed to hold gains above that level and is now hovering near the Bollinger midline suggesting momentum is fading. A failure to reclaim and hold above 1.4020 opens the door for a drift back toward the 1.3900–1.3860 support zone. The ADX at 26 reflects a weak trend, reinforcing the likelihood of choppy, range-bound trading in the near term.
For today, USDCAD support is at 1.3920 and 1.3890. Resistance is at 1.4010 and 1.4030
Today’s Range: 1.3920–1.4020
Chart: USDCAD daily
FX at a Glance
The Art of the Deal
The US and Iran have “sort of” reached a nuclear deal with Iran, according to Trump. The President revealed the leverage he is wielding to secure a nuclear agreement. Quite simply, it’s a binary process: “there is a very, very nice step and there is the violent step.” Oil prices tumbled on the possibility of a deal which would likely lead to increased Iranian crude supplies.
Are Exchange Rates Part of Tariff Discussions?
Talk that US officials have included currency exchange rates in their tariff talks is raising eyebrows in FX markets. It started with this week’s surge in the Taiwan dollar on reports that authorities would expect a stronger Taiwan dollar to smooth the way on US Taiwan tariff talks. Then the Korean won soared after authorities admitted the currency was discussed in US/Korea trade talks. Japanese Finance Minister Katsunobu Kato said he will discuss foreign exchange with US Treasury Secretary Scott Bessent at the upcoming G-7 meeting in Kananaskis, Alberta. Where there is smoke, there is fire.
Geopolitics will Ensure a Cautious End to the Week
There is a lot happening that could potentially disrupt markets. The US and Iran are supposedly close to reaching a deal on Iran’s nuclear ambitions, Trump is still talking about taking over Gaza and turning it into a “freedom zone,” while cease-fire/peace talks between Russian and Ukraine are going on in Turkey, albeit without Putin.
Global Equity Traders Remain Upbeat
Asian equity indexes closed on a mixed note with Japan’s Topix closing barely better than flat while Australia’s ASX 200 gained 0.56%. Hong Kong’s Hang Seng index lost 0.46%.
European bourses are in the green with the French CAC 40 index leading the pack. With a 0.33% gain. S&P 500 Futures are up 0.28%. The US 10-year Treasury yield is 4.40% and gold (XAUSUD) is 3179.46.
EURUSD
NY Open: 1.1194, Overnight Range: 1.1182-1.1220
EURUSD is directionless inside yesterday’s range but has a modest bid on slightly improved odds for a more dovish Fed after this week weaker than expected inflation and PPI data. However gains are limited due expectations for at least two more ECB rate cuts this year
GBPUSD
NY Open: 1.3285, Overnight Range: 1.3285-1.3333
GBPUSD is at its session low after an uneventful overnight session. GBPUSD downside may be limited if there is renewed US dollar selling pressure from the Trump administrations debt financing bill which to paraphrase Trump, “is a big, beautiful deficit boosting bill.” The short term GBPUSD technicals are bullish above 1.3270 which is guarding the uptrend line from the beginning of the year at 1.3030.
USDJPY
NY Open: 145.56, Overnight Range: 144.92-145.73
USDJPY had a choppy session with the bottom hit in Asia due to bit of safe-haven demand for yen ahead of the weekend. The slide in the US 10-year yield from 4.54% yesterday to 4.369% encouraged some selling. Q1 GDP fell 0.7% y/y compared to the forecast of -0.2% and 2.2% previously. The weakness was blamed on the threat of Trump tariffs which led to stagnant public consumption and falling exports.
AUDUSD
NY Open: 0.6420, Overnight Range: 0.6395-0.6437
AUDUSD remained rangebound with gains capped by fading optimism following yesterday’s robust employment data. Uncertainty around the outcome of the China/US tariff war were reinforced by reports that America would add more Chinese firms to its chip blacklist.
NZDUSD
NY Open: 0.5885, Overnight Range: 0.5866-05916
Kiwi traded choppily but remained inside yesterday’s range. NZDUSD jumped from its session low to the peak after Q2 inflation Expectations rose 2.29% from 2.06%. The increase was blamed on Trump and his tariffs.
USDMXN
NY Open: 19.3728, Overnight Range: 19.4509-19.5279
USDMXN jumped from 19.3284 to 19.5174 after Banxico did as expected and cut its benchmark rate to 8.50% while leaving its forward guidance unchanged. The statement cited weak Q1 GDP growth and ongoing trade uncertainty to justify the move Banxico said CPI is still expected to reach its 3% target by Q3 2026, FX depreciation, global disruptions and input pressures are a risk to the forecast. Monetary policy will remain tight, but more rate cuts are likely.
China Snapshot`
PBoC fix: 7.1938 vs exp. 7.2085 (Prev. 7.1963).
Shanghai Shenzhen 300 fell 0.46% to 3889.09
The 90 day pause in the US/China tariff war sparked a nearly 300% rise in container ship bookings. China and Brazil countered Trumps middle East trade tour with deals of their own. The PboC renewed a $26.38 billion bilateral currency swap agreement for 5 years. China agreed to invest $4.78 billion in Brazil, among other deals.
FX high, low, open (as of 6:00 am ET)
Sources: Yahoo Finance, Oanda, Investing.com, Bloomberg.
