RBC Sees USD/CAD Bearish Reversal; BoC Events Unlikely To Shift FX View

03:44 PM EST, 01/23/2026 (MT Newswires) -- RBC Capital Markets said USD/CAD has formed a short-term bearish trend reversal, while it continues to expect CAD/CLP and CAD/NOK to fall in the first half, with next week's Bank of Canada events unlikely to change those dynamics.

In its weekly Rates & FX note, RBC Capital Markets said tactical momentum in USD/CAD has shifted to the downside after rejecting resistance at 1.3932 earlier this month, and it would not fight this downside momentum given positioning net flat in the pair. Both the Fed and the Bank of Canada are likely to hold rates steady next week, outcomes that are well priced in by markets, while Canada's monthly GDP figures have not been the best predictors of quarterly GDP prints.

RBC said it still likes short CAD/CLP as a metals and USMCA-related trade uncertainty play for H1, while the G10-only alternative short CAD/NOK idea also holds, with the latest Norges Bank decision and a close below a short-term trendline reinforcing the downtrend.

"This week's bearish trend reversal below 1.3840 has ended the corrective rally in USD/CAD, exposing 1.3728 next on the downside. Additional support stands at 1.3643 (December low). Moves to resistance at 1.3806, 1.3875 and the old double bottom from October at 1.3932 are expected to attract selling interest given the bearish trend reversal," said George Davis, chief technical strategist at RBC Market Capitals.

On rates, RBC expects "another uncontroversial BoC hold next week", with GDP projections more likely to be upgraded, reflecting a better starting point after Q3 GDP revisions and incorporating fiscal policy from the November 4 budget for the first time. The bank continues to see the market underpricing the potential for BoC hikes later in the year, while CA/US spreads ended the week only slightly cheaper after earlier volatility.

"The 3.35% resistance level that we highlighted last week has attracted some selling interest in bonds, pushing yields back toward initial support at 3.43%. Nonetheless, yields will have to close above the 3.48/3.50% area in order to reassert the prior uptrend. Reassess on a daily close below 3.27%," said Davis.

Key Things To Watch:

Canada: It is the second straight week of busy releases for Canada, with the BoC meeting (Wed), SEPH payrolls (Thu), Int'l trade (Thu) and GDP (Fri) all due, the latter three for November.

Global: There are rate decisions from the Fed (Wed) and Riksbank (Thu). Meanwhile, data releases include Q4 CPI in Australia (Tue), Jan Tokyo CPI in Japan (Thu), Dec producer prices in the US (Fri), 'flash' Q4 GDP in the Euro area (Fri), and 'flash' Jan CPI in Spain & Germany (Fri). US earnings season also continues (for example, Microsoft. Meta and Apple).

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