Societe Generale analysts see further upside for USD/CAD after technical breakout, citing BoC policy pause and widening yield spreads.
The Canadian dollar faces downside pressure against the USD after USD/CAD broke above a descending trendline, with analysts citing a bullish technical signal. The Bank of Canada is expected to keep its policy rate unchanged at 2.25%, reinforcing a neutral stance amid economic contraction and easing core inflation at 2.1% in April.
Recent data shows the economy entered a technical recession after two quarters of contraction, though a strong employment report supports the BoC’s reluctance to adjust rates. Analysts project no rate changes through 2026, potentially weakening CAD further, especially as 2-year US-Canada yield spreads widen to around 125 basis points.
The 30-day correlation between CAD and WTI crude has turned negative, while its link to gold has strengthened, adding to downward momentum. USD/CAD’s breakout could target 1.40 if current trends persist.