April 25, 2025

USDCAD: open 1.3891, overnight range 1.3845-1.3893, close 1.3857

USDCAD rallied alongside broad U.S. dollar strength, driven by easing tensions in the U.S.–China tariff dispute. But Trump’s tariffs have amplified U.S. recession risks, pushing the odds of a Fed rate cut at the June 18 meeting to 61.7%.

At first glance, a stronger U.S. dollar in a rate-cutting environment seems counterintuitive. But even amid tariffs and a slowing global economy, America remains better positioned to weather the fallout than any other G-10 economy. Moreover, if U.S. rates are headed lower, expectations for stronger equity markets are rising—and that optimism is helping to underpin the greenback.

Canada retail sales ex-autos blew away the forecast of a drop of 0.4% m/m and surged 0.5% while the headline number was unchanged.  Pre-tariff buying fueled the gains but the results were ignored by traders.

WTI oil gave back all this weeks gains and opened in NY near the bottom of its 61.82-63.35 range. Reports that Russia is increasing drilling activity offset hopes of renewed demand from an improved tariff outlook.

US Michigan Consumer Expectations are forecast at 47.2, unchanged from last month.

USDCAD Technicals

The USDCAD intraday technicals are bullish while trading above 1.3860, looking for a break above 1.3910 to extend gains to 1.3950.  A move below 1.3860 targets 1.3810 then 1.3770.

Longer term, USDCAD is consolidating in a 1.3770-1.4010 range and trading with a minor bid. A break above 1.4010 opens the door to further gains to 1.4112.  Momentum indicators suggest a lack of conviction for downside moves but suggest the latest rally is more of a correction than a trend.

For today, USDCAD support is at 1.3840 and 1.3790. Resistance is at 1.3910 and 1.3950

Today’s Range: 1.3820-1.3920

Chart: USDCAD hourly.

FX at a Glance

Tariff Thaw

Trump dialed back his China tariff rhetoric and said he would consider lower tariffs on some imports. That may have prompted Chinese authorities to offer similar relief. Meanwhile, Trump insists that his administration is having trade talks with China while Beijing says, “it ain’t so.” Meanwhile, Fed officials continue to warn about the economic fallout from tariffs. Minneapolis Fed President Neal Kashkari said that the companies he was meeting with were considering layoffs due to the uncertainty around tariffs and trade.

“Oh, What a Relief”

Global equities got a boost overnight. It was as easy as A-B-C, simple as 1,2,3, and all it took was Alphabet reporting first quarter revenue and profit that beat expectations and China and Trump downgrading the tariff rhetoric.

Australian and New Zealand stock indexes would have led the Asian equity rally except both markets were closed for holidays. Japan’s Topix climbed 1.37% to close the week with a 3.7% gain. Hong Kong’s Hang Seng rose 0.32%.

European bourses are higher. The French CAC 40 index is up 0.52% while the German Dax has climbed 0.67%. The UK FTSE 100 index has gained 0.15%,  S&P 500 futures gave up earlier gains and are down 0.19%. The US 10-year Treasury yield ticked down to 4.272% while safe-haven trade unwinding knocked gold (XAUUSD) down to 3300.25. The CBOE VIX index is at 26.38, its lowest point for the week.

EURUSD
NY Open: 1.1348 Overnight Range: 1.1315-1.1395
EURUSD bottomed out in Asia and then traded sideways into the NY open. The improved risk sentiment following the latest China/US tariff story encouraged profit-taking and knocked the single currency down close to where it started the week. ECB policymaker told Bloomberg that “If in June inflation is projected to fall below our 2% inflation target over the medium term, then the right reaction is to cut rates further.”

GBPUSD
NY Open: 1.3300 Overnight Range: 1.3274-1.3344
GBPUSD price action mirrored that of EURUSD, but it saw a bit of support after UK March Retail Sales rose 2.6% y/y compared to the forecast of 1.8% and the February result of 2.2%, with analysts suggesting the gain was driven by “good” weather.

USDJPY
NY Open: 143.61 Overnight Range: 142.59-143.85
USDJPY rallied after improved risk sentiment sparked some safe-haven yen trades to be unwound. Gains were capped by the higher-than-expected reading for Tokyo CPI (actual 3.4% vs forecast 3.2% and 2.4% previously), which keeps the door open for the BoJ to hike rates.

AUDUSD
NY Open: 0.6375 Overnight Range: 0.6375-0.6420
AUDUSD rallied in Asia then reversed the move into the New York open. AUDUSD and NZDUSD volumes were greatly reduced as markets in both countries were closed for a holiday.

USDMXN
NY Open: 19.6764 Overnight Range: 19.5837-19.6898
USDMXN drifted higher in the wake of renewed US dollar demand following talk that China and the US are de-escalating tariff tension. Yesterday’s higher-than-expected Mexican inflation reading still leaves CPI inside Banxico’s targeted range. The central bank is on track to cut rates by 50 bps at its May meeting.

China Snapshot`

PBoC fix:  7.2066 vs exp. 7.2898 (Prev. 7.2098)

Shanghai Shenzhen 300 rose 0.07% to 3786.99

China considers exempting some US imports from 135% tariffs. Policymakers pledge to offer support to firms and workers impacted by tariffs including lowering rates.

FX high, low, open (as of 6:00 am ET)

Sources: Yahoo Finance, Oanda, Investing.com, Bloomberg.