pricing is fading fast as U.S. data surprises to the upside, helping to drive trend changes in and .
- U.S. data outperformance cutting deeper into Fed rate cut bets
- Yield rebound helping to stabilise the U.S. dollar across the board
- USD/CAD flirting with 1.3750 after bullish breakout above 50DMA
- USD/CHF grinding higher with resistance at .8058 in focus
An abrupt turnaround in U.S. economic data has triggered a sharp unwind in pricing, driving Treasury yields higher further out the US curve. Because the move has been driven by shifting monetary policy expectations—not bond buyers demanding more return to offset risk—it’s acted as a relief valve for the , helping drive a trend shift in pairs like USD/CAD and USD/CHF.
U.S. Data Disappointment Evaporates…
US data is suddenly starting to impress again, as shown by Citi’s U.S. economic surprise index below. It tracks how data prints relative to expectations, giving more weight to recent results. A positive reading—as we’re seeing now—means more data is beating than missing, marking a clear reversal from earlier in the year when misses dominated.
Source: Refinitiv
…Sparking Unwind of Fed Rate Cut Pricing
That shift is showing up in the top left pane of the next chart, which tracks the shape of the 2025 Fed funds futures curve. It gives a rough read on how many basis points of are priced in this year.
As the data has improved, markets have slashed expectations from three cuts to less than two, lifting Treasury yields across the curve.
Source: TradingView
US Debt Concerns Take a Backseat
What makes this yield move different from the one seen after Donald Trump unveiled reciprocal tariffs on U.S. Liberation Day is that it reflects improved economic prospects, not a rise in term premium—the extra yield investors demand to take on risk. We can see that by looking at the next chart, which tracks US real yields, which is what investors earn over expected inflation.
When compared with trend U.S. growth, widely believed to sit just under 2% annually, it gives a rough gauge of term premium across maturities.
Source: TradingView
For (in green), the term premium remains negative. debt (in blue) is slightly positive. For and maturities, premium is above 50bp—elevated versus post-GFC norms—but still shy of levels seen during the peak of the ‘Sell America’ trade in April and May. That’s helped the U.S. dollar to rebound, including against the Canadian dollar and Swiss franc.
Data Revival Drives Dollar Rebound
The next chart tracks the two-week correlation between rate cut pricing and USD/CAD and USD/CHF. By stripping out the month and quarter-end distortions, it provides a cleaner read on how much influence the rates story is having.
Source: TradingView
The top pane in black is the key one—it shows the shape of the Fed funds futures curve for 2025. As rate cut bets have faded, both USD/CAD and USD/CHF have typically moved in the opposite direction, with correlation scores of -0.84 and -0.91, respectively over the past ten sessions.
Interestingly, correlations with outright Treasury yields and two and 10-year spreads versus Canada aren’t as strong. In fact, the Canada-U.S. spread relationship is meaningfully inverse, suggesting narrowing differentials haven’t helped the Loonie. That hints that the rebound in these USD pairs isn’t purely about the Fed. My sense? Markets are starting to wake up to the reality that government debt concerns aren’t just an American problem.
USD/CAD Tests Key Topside Level
Source: TradingView
USD/CAD has been grinding higher since the beginning of July, rebounding after failing to take out the June lows. First it took out horizontal resistance at 1.3650 and then the 50-day moving average, the latter coinciding with a bullish engulfing candle on Thursday. Right now, the pair finds itself testing 1.3750—a key level that has acted as support and resistance over recent months.
With seven failed attempts to take out the level since the middle of June, it underlines why near-term price action may be important when it comes to longer-term directional risks.
If USD/CAD can close above 1.3750 as Thursday’s candle signals, it may prompt other bulls off the sidelines, allowing for longs to be established above the level with a stop beneath for protection. As for targets, 1.3800 is one for shorter-term players, marking the high set on June 23 during a failed breakout attempt. Beyond, 1.3860 is a minor resistance level, with a firmer test for bulls located 40 pips higher at 1.3900.
If the price is unable to break cleanly above 1.3750, uptrend support running from the July lows is found around 1.3700. If it were to be broken, 1.3650 and 1.3550 would be the next downside levels of note, providing potential targets if the uptrend turns out to be a bear wedge.
For the first time in months, the signal from momentum indicators such as RSI (14) and MACD is no longer bearish, with both now sitting in marginal bullish territory. It’s hardly a sense of bullish euphoria, but it’s a noticeable departure from recent trends, favouring a neutral bias.
USD/CHF: Trend Change Underway?
Source: TradingView
The setup for USD/CHF is not dissimilar, with the pair sitting in an uptrend and testing horizontal resistance at .8058 which coincides with the low struck on June 13. Having taken out downtrend resistance running from the May highs earlier this week, it gives a sense that the bearish tide may be slowly turning. Momentum indicators back this view up, with both RSI (14) and MACD trending higher and within spitting distance of neutral territory.
If USD/CHF can break and close above .8058, the 50-day moving average, .8160 and .8246 screen as potential targets for longs. A stop beneath .8058 would offer protection against reversal.
If the pair is unable to break .8058, the setup could be flipped, allowing for shorts to be established with a stop above for protection. 0.8000 capped gains earlier this month, making it screen as an initial target. Former downtrend resistance may now revert to offering support, putting it on the radar for bears. It’s located around 10 pips lower with the July 1 uptrend another level to watch some 30 pips below. If the latter were to be broken, it would amplify the risk of a retest of the July 1 low.