The Canadian Dollar (CAD) is once again trading flat against the US Dollar (USD) as it consolidates its recent losses and sees notable outperformance against most of its G10 peers.

No reaction to fiscal announcement ahead of trade data

"The CAD’s lower beta risk profile remains an important consideration in periods of broader economic uncertainty (France, Japan) as Canada’s close economic ties to the US tend to dampen volatility. Domestically, markets have offered little reaction to Monday’s fiscal announcements that saw PM Carney shift Canada’s federal budget to the fall. Carney also announced a change in capital expenditure definitions, a key pillar of the upcoming budget."

"US-Canada yield spreads remain steady, offering little in terms of fundamental direction. Risk reversals are also steady, and close to neutral. Near-term risk lies with the 8:30am ET release of international merchandise trade data, with expectations of a widened deficit in August. BoC risk lies with SDG Rogers’ speech on Thursday. Our USD/CAD FV estimate is marginally higher, at 1.3713."

"USD/CAD’s recent gains are showing signs of early exhaustion with a flattening out of the RSI and a clear struggle to extend beyond the mid-1.39 congestion area that coincides with the 61.8% retracement of the September 2024-February 2025 rally. We look to material resistance at the 200 day MA (1.3982) and the psychologically important 1.40 level. We look to a near-term range bound between 1.3920 and 1.3980."