The USD/CAD currency pair is trading a bit higher at around 1.3770 ahead of the US Consumer Price Index (CPI) data for July. Analysts expect a rise in US inflation rates, with the headline at 2.8% and core inflation at 3.0% year-on-year. Traders anticipate a 25 basis point interest rate cut by the Federal Reserve in September. Meanwhile, the Canadian Dollar faces pressure from a weakening labor market, indicating possible interest rate cuts from the Bank of Canada.

USD/CAD Pair Movement

The USD/CAD pair is above the 20-day Exponential Moving Average (EMA), sitting at 1.3740. A rise past 1.3880 could target 1.4000. If it drops, it may head toward the 1.3500 mark. The US Dollar is the most traded currency globally, with an average daily transaction of $6.6 trillion as of 2022. The value of the US Dollar is heavily influenced by the Federal Reserve’s policies, including interest rate changes and monetary measures. This information is for informational purposes only and should not be considered investment advice. Always research thoroughly before making financial decisions. Given that today is August 11, 2025, the USD/CAD pair is in a potentially volatile phase. The upcoming US CPI data is vital and could confirm or challenge anticipated Fed rate cuts in September. If inflation exceeds expectations—like June’s 2.9%—it could delay rate cuts and boost the US Dollar.

Canadian Economy and Fed Dynamics

Traders should closely watch the Canadian economy’s relative weakness. Recent data from Canada’s Labour Force Survey shows the unemployment rate rising to 6.4%, a level not seen since the post-pandemic recovery of 2023. This rising pressure on the Canadian job market gives the Bank of Canada a solid reason to cut interest rates soon. In the coming weeks, the key focus will be on the race between the Fed and the Bank of Canada to adjust monetary policy. Historically, the Bank of Canada has acted swiftly, pausing its rate hikes in early 2023 before many other central banks. This history suggests it may move faster than the Fed again, likely pushing the USD/CAD pair higher. From a technical perspective, holding above the 1.3740 level shows strength. If the US inflation data is not unexpectedly low, the narrative of Canadian economic weakness could dominate. This scenario makes strategies that benefit from a rising USD/CAD—like buying call options with a strike price around 1.3800—worth considering. If this situation unfolds, a significant break above the 1.3880 resistance level seems likely, opening up potential movement toward the psychologically important 1.4000 mark. On the flip side, strong Canadian data or clear signals of aggressive Fed rate cuts could push the pair back toward the 1.3500 support level. Create your live VT Markets account and start trading now.

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