Societe Generale’s Kenneth Broux reports that the Canadian Dollar (CAD) has extended its weakness against the US Dollar (USD), with the USD/CAD currency pair breaking out of a large consolidation and reaching towards 1.4250. The previous upper range at 1.4130 is now acting as a key support level, and only a breach below this would indicate the risk of a deeper downward move. Broux notes that the next technical objectives for USD/CAD could be at 1.4335 and 1.4425 if the uptrend continues [1].
CFTC data reveals that short CAD positions have climbed to 43.5% of open interest, marking the most bearish sentiment since mid-December 2025. Despite the Canadian Dollar being one of the most tactically oversold currencies in the G10, there is no sign that the stretched levels above 1.42 are attracting opportunistic buyers looking for mean reversion [1].
The Loonie last traded at these levels at the end of the Liberation Day tariffs in April 2025. Since then, two-year rate differentials have widened significantly to 142 basis points, reflecting a repricing of the outlook for the US Federal Reserve. This widening has contributed to the Canadian Dollar’s underperformance [1].
According to the Bank of Canada’s second quarter business outlook survey published yesterday, the Gulf war has caused a spike in inflation expectations and is prompting Canadian oil producers to increase their investment and production plans. Market participants are now turning their attention to Canadian labour market data due on Friday. After a strong employment gain of 87.8k in May (with a three-month average of 28k, the first positive reading since January), employment growth is forecast to have moderated to 10k [1].
CONCLUSION
The Canadian Dollar remains under significant pressure against the US Dollar, with technical and positioning data suggesting further downside risk unless key support levels are breached. Market participants are closely watching upcoming Canadian labour data and the impact of higher inflation expectations on the economic outlook.