The Canadian dollar is on its back foot today, with the USD/CAD pair climbing to around 1.3750—a level we haven’t seen in nearly three weeks.
Yesterday was full of twists and turns for the U.S. dollar. Things were humming along—USD was rising steadily—until political drama from Washington threw markets off course. News broke that former President Trump had drafted a letter to fire Federal Reserve Chair Jerome Powell and had discussed it with Republican lawmakers. The headlines rattled global sentiment, sending the dollar—and the USD/CAD pair—into a sharp nosedive.
But in classic whiplash fashion, Trump walked it back just hours later, saying he had “no plans” to fire Powell—“unless he has to leave for fraud.” (Let’s not even unpack that one.) Markets took that as a green light, and the USD bounced right back.
Then came another twist: U.S. retail sales data for June crushed expectations, jumping 0.6% versus the 0.1% forecast. That’s the strongest monthly reading since March—and it effectively erased hopes for a near-term Fed rate cut. Markets now expect fewer than two cuts this year, down from three just weeks ago. In short, the U.S. dollar looks strong, and the Canadian dollar is struggling to keep up.
So where does USD/CAD go from here?
Barring any more surprise tweets or headlines, the pair could keep creeping higher. With August approaching, traders remain cautious about the U.S. political landscape, central bank decisions, and any unexpected shocks. But here’s the wild card: if Trump seriously moves to oust Powell, the impact would be massive. Just the rumor of it dropped the U.S. Dollar Index by 1% yesterday. If it happens, USD/CAD could quickly fall toward the 1.34s, or even test the multi-year lows near 1.32.
For now, resistance around 1.3750 is holding, and many traders are using this USD strength as an opportunity to sell the rally. Some are even getting in early—shorting (selling USD) around this level and preparing to add more if we approach 1.38.
Bottom line? The Canadian dollar isn’t in the driver’s seat—it’s just a passenger, gripping the side door while the U.S. steers through every policy swerve and political curve. If you’re watching the exchange rate, keep your eyes on Powell, the Fed, and whatever plot twist Washington serves up next.
The Canadian dollar is currently trading at 1.3755 CAD against the US Dollar.
