04:35 PM EDT, 05/08/2026 (MT Newswires) -- USD/CAD is likely to remain "trapped" in a range-bound environment in the coming months, with the pair seen trading between 1.3500 and 1.3900, RBC Capital Markets said in its latest FX View note.

RBC added its end-of-second-quarter forecast for USD/CAD stands at 1.3700.

The bank said Friday's Canadian and U.S. employment reports point to both the Bank of Canada and the Federal Reserve holding interest rates for now.

Although, RBC noted, the Canadian employment series tends to be volatile, it said the latest print "pours some cold water on the possibility of a BoC rate hike in the short-term."

Meanwhile, RBC said the "stabilizing" U.S. labour market further diminishes the risk of a near-term dovish Federal Reserve pivot, particularly as attention shifts to potential secondary-round inflation effects.

RBC noted the outlook is also unfolding against the backdrop of the ongoing Iran conflict, "for which the path is uncertain."

"As long as the USD is not experiencing a sustainable broad-based rally, this morning's Canadian data reinforce CAD's underperformance vs its commodity/higher yielding peers in the past month," the bank said.

On technicals, RBC said last week's close below 1.3598 "reasserted the downtrend," suggesting that rallies are viewed as a selling opportunity. The bank noted USD/CAD was hovering around trendline resistance at 1.3674, with 1.3728 seen as the next resistance level. "If USD/CAD closes above the latter, then the risk is additional gains towards 1.3799 and 1.3856," RBC added.

Support levels are seen at 1.3526 and 1.3482, according to the bank.