Canadian Dollar Rises Slightly as USD Weakens, Mixed Performance on Crosses

Canadian Dollar Rises Slightly as USD Weakens, Mixed Performance on Crosses

The Canadian Dollar (CAD) is showing modest strength against the US Dollar (USD) in Friday’s session, as broad risk-on sentiment and tighter yield spreads offer tailwinds. However, CAD remains mixed against other core G10 currencies, reflecting a more nuanced market tone.

Risk Sentiment and Yield Spreads Support CAD

Analysts cite improved global risk appetite and a narrowing of the USD-CAD yield differential as key drivers behind the Canadian Dollar's support. According to forex strategists, the yield spread is now the thinnest in favor of the USD since late last year, making the USD less attractive on a relative basis.

“Our estimated fair value for USD/CAD stands at 1.3615, but the USD is diverging from its equilibrium,” said one market expert. “That divergence may cap the greenback’s upside potential and push spot marginally lower.”

CAD Mixed on the Crosses

Despite the improvement against the USD, CAD is trading mixed against other major currencies, reflecting the complex interplay of global macroeconomic factors and currency-specific news.

Meanwhile, Canadian officials remain cautious, and market hopes for a full rollback of US-imposed tariffs are fading.

“Comments from Canadian policymakers suggest that expectations for the complete removal of tariffs are overly optimistic,” notes an analyst.

Technical Snapshot (USD/CAD):

• Resistance: 1.3685
• Support: 1.3600
• Fair Value Estimate: 1.3615
• Short-Term Outlook: Sideways to slightly bearish for USD/CAD

Conclusion

The Canadian Dollar's slight advance comes on the back of a weaker US Dollar and narrowing yield spreads, though gains remain moderate. Divergence from USD/CAD fair value could constrain further USD strength, while policy uncertainty on the trade front keeps CAD gains in check.