The USDCAD pair declined, influenced by Fed Chair Powell’s dovish comments at the Jackson Hole Symposium. Powell’s statements increased expectations for a potential rate cut in September, now with an 85% probability. Traders anticipate 54 bps of easing by year’s end, with adjustments in US interest rate expectations affecting the USD.<\/p>\n
Attention now turns to the upcoming US NFP report, which will impact interest rate forecasts. Strong data could alter the rate cut probability to a 50\/50 chance, while softer data may reinforce dovish expectations. In Canada, inflation has risen steadily, remaining near the upper target range, while recent employment reports have been positive.<\/p>\n
The Bank of Canada maintained interest rates unchanged but left room for adjustments depending on growth and inflation data, with a 23 bps easing anticipated by year-end. On the daily USDCAD chart, sellers likely target a drop to the 1.36 level, while buyers aim for 1.40 if prices rise above 1.3860.<\/p>\n
On the 4-hour chart, a major trendline supports bullish momentum, with buyers targeting 1.40 and sellers eyeing a break to 1.36. The 1-hour chart offers limited additional insights, maintaining similar buyer and seller strategies. Upcoming data includes US Consumer Confidence, Jobless Claims, and Canadian GDP figures.<\/p>\n
Given the Federal Reserve’s dovish turn at Jackson Hole, we see the US dollar under significant pressure. The market is now pricing in an 85% chance of a rate cut in September 2025, which has shifted the momentum in the USDCAD pair. This creates a clear opportunity to position for further US dollar weakness in the coming weeks.<\/p>\n
The fundamental divergence between central banks is stark, as Canada’s underlying inflation continues to hover near 3%, supported by a recent surprise upside in their July 2025 employment report. In contrast, the latest US PCE data from July 2025 showed inflation moderating to 2.7%, giving the Fed more room to ease policy. This policy gap makes selling US dollars against Canadian dollars a compelling narrative.<\/p>\n
Looking back, we saw similar dynamics in late 2023 when expectations of Fed cuts accelerated, leading to a sharp, multi-week decline in the dollar. The current setup mirrors that period, suggesting that this initial move lower could have more room to run. The upcoming US Non-Farm Payrolls report is the next major test for this thesis.<\/p>\n
For traders anticipating continued USDCAD weakness, buying put options with a strike price at or below the 1.36 handle seems prudent. This strategy capitalizes on the downward momentum while defining risk, especially if the price fails to hold above the major upward trendline. We would view any rally towards the 1.3860 level as an opportunity to add to bearish positions.<\/p>\n
Conversely, a surprisingly strong US jobs report, perhaps coming in over 250,000, could quickly unwind these dovish bets and send USDCAD higher. In this scenario, traders could use call options to position for a break back above the 1.3860 swing level. The primary target in that case would shift towards the 1.40 handle.<\/p>\n
The upcoming economic data, particularly the US PCE price index and Canadian GDP this Friday, will introduce significant volatility. This environment is well-suited for strategies like straddles or strangles for those who expect a large price move but are uncertain of the direction. These reports will be critical in confirming whether the trend of US economic cooling is continuing.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" USDCAD dips after Powell’s dovish tone; traders eye data for rate cut clues in US and Canada.<\/p>\n","protected":false},"author":62,"featured_media":16962,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-29556","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/29556","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=29556"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/29556\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16962"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=29556"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=29556"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=29556"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}