The USDCAD pair is stable as weak economic data from the US and Canada balance each other. The USD has weakened following a disappointing jobs report. The market now predicts three rate cuts by the end of the year, totaling 70 basis points. There’s a 10% chance of a 50 basis point cut in September, depending on the upcoming CPI report, which may further weaken the USD ahead of the FOMC meeting. The US dollar is range-bound, influenced by bearish expectations about the Federal Reserve, possibly due to oversold positions. If economic activity strengthens, it could change rate cut expectations and bolster the dollar. However, the trend currently looks downward unless stronger data emerges. In Canada, weak employment figures have led to a significant sell-off in the CAD. The market is anticipating a rate cut in September and an additional 44 basis points cut by year-end, even with inflation pressures and a declining labor market.

Technically For USDCAD

Technically, the USDCAD pair shows patterns across different timeframes. On the daily chart, rejections around the 1.3860 level hint at a head and shoulders pattern, needing a break below 1.3720 for confirmation. The 4-hour and 1-hour charts exhibit range-bound behavior, indicating defined risks and possible moves toward the 1.40 level or lower to around 1.3550. Key upcoming events include the US PPI, CPI reports, Jobless Claims figures, and the University of Michigan Consumer Sentiment report. Currently, USDCAD is tightly coiled between critical levels. The weak US job numbers from last Friday indicated that Non-Farm Payrolls added only 155,000 jobs in August 2025, heightening expectations for Federal Reserve cuts. This has removed some pressure from Canada’s weak employment report, leaving the pair lacking direction for now. The market has factored in roughly 70 basis points of Fed cuts by the end of 2025, a significant shift that has developed over the last quarter. This dovish sentiment is heavily impacting the US dollar, especially after the August 2025 CPI report revealed core inflation slowed to a 2.8% annual rate. However, with so much easing expected, we might be reaching peak pessimism for the dollar.

Canadian Economic Outlook

In Canada, the outlook is challenging after Statistics Canada reported a net loss of 20,000 jobs and a rise in the unemployment rate to 6.3% for August 2025. This cements expectations for a Bank of Canada rate cut in October, limiting any potential strength in the Canadian dollar. The central bank is now balancing between a weakening labor market and persistent inflation. For derivative traders, the setup ahead of this week’s US inflation data indicates a volatility opportunity. The clear range between 1.3720 and 1.3860 makes an options strangle an appealing strategy. By purchasing both a call option above 1.3860 and a put option below 1.3720, traders can profit from a sharp move in either direction after the data is released. If the upcoming US CPI report on Thursday is weaker than expected, we anticipate a decisive break below the 1.3720 support level, potentially confirming a bearish head and shoulders pattern that has been developing since July 2025. This would likely shift our focus to the 1.3550 area as the next target. On the other hand, if the inflation number surprises on the high side, markets may quickly reduce their Fed cut expectations, leading to a strong USD rally. In this case, a break above the critical 1.3860 resistance would signal a sustained upward move. The next major target for buyers would then shift to the significant 1.4000 level. Create your live VT Markets account and start trading now.

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