Insights 
VT 
The U.S. dollar rose due to stronger-than-expected ADP employment data and a 3.0% annualised increase in Q2 GDP. This growth came from a favourable shift in trade and inventories, while final sales to private domestic purchasers grew by just 1.2%. ADP private payrolls reported a rise of 104K, compared to the expected 75K, but differences from BLS nonfarm payrolls limit predictability.
Regarding currency movements, EURUSD has fallen below several swing areas, with a next target at the 50% midpoint of the move from May to the July high. USDJPY has reached new highs, with the next target at the 50% midpoint of recent high-low movements. The Bank of Canada (BoC) is expected to keep its interest rate at 2.75%, amid uncertainties about U.S. tariffs and potential deals.
Boc Interest Rate Movements
The BoC rate sits in the neutral range of 2.25–3.25%, with the market pricing a 56% chance of a rate cut by year-end. Despite strong labour market data, risks lean towards downside due to trade uncertainties. The USDCAD has been climbing, surpassing the 50% midpoint and other key technical levels, with future targets near higher retracement levels and moving averages.
Based on the strong U.S. data from this morning, we see the dollar continuing its upward trend against major currencies. The Q2 GDP figure of 3.0% looks good on the surface, but the underlying weakness in consumer demand, with private sales up only 1.2%, suggests this strength may not last. The ADP payroll number was a beat, but we know from experience that it can diverge significantly from the official BLS jobs report due later this week.
For now, the technical breakdown in EURUSD below the 1.1500 level is a key signal for us. With the price now targeting the 1.1447 midpoint, traders should consider strategies that profit from further downside or a cap on any rallies. Selling rallies near the 1.1500 resistance or buying short-dated put options could be a way to position for a test of the 100-day moving average.
Similarly, USDJPY has broken out above the 148.72 resistance area, setting its sights on the critical 149.036 level. We’ve seen this level reject price advances twice already this month, so a sustained move above it is needed to confirm bullish momentum. Buying call options could offer a leveraged bet on a breakout toward the 200-day moving average at 149.53.
Trade Talks and Market Volatility
The main event for the coming weeks will be the Bank of Canada and the ongoing U.S. trade talks. The BoC is holding its rate steady at 2.75% as expected, caught between solid domestic data and the major risk of U.S. tariffs. Recent statistics support their inaction, with June’s core inflation holding firm at 2.8% and the labor market showing resilience.
However, the August 1st deadline for a new trade deal is the single biggest catalyst on the horizon. Prime Minister Carney’s comments confirm a deal is unlikely by then, and the market is already pricing in a 56% chance of a BoC rate cut by year-end, which shows how nervous traders are. We remember the market whiplash during the 2018-2019 trade disputes over steel and aluminum, and we expect similar volatility now.
This uncertainty makes USDCAD the most interesting pair to trade with derivatives. The pair has cleared the 1.3800 level and is now targeting key resistance around the 100-day moving average at 1.38277. The risk of trade talks failing and tariffs increasing creates a clear bullish case for the pair.
Given the approaching deadline, implied volatility in USDCAD options is likely to rise significantly. Buying call options now, while they may be relatively cheaper, could be an effective way to position for a sharp move higher if the trade situation deteriorates. This strategy defines your risk while giving you upside exposure to a potentially explosive move.
