USDCAD draws attention as employment data from both the US and Canada are set to be released tomorrow

Market Fundamentals Overview

US Dollar (USD) Update

The US dollar has experienced choppy trading recently as investors await the upcoming Non-Farm Payrolls (NFP) report. Economic indicators from the US have delivered mixed signals this week: Monday’s ISM Manufacturing PMI came in weaker than expected, while the Services PMI released yesterday showed strength. The ADP employment data was solid, albeit slightly below forecasts, and job openings data pointed to some softness.

From a broader perspective, the outlook remains unchanged. Markets are currently factoring in approximately 62 basis points of rate cuts by the end of the year, with a 57% chance that the Federal Reserve could initiate easing as soon as March. For the Fed to move at the next meeting, both the NFP and Consumer Price Index (CPI) figures would need to be notably weak; otherwise, traders are likely to adjust their expectations for rate cuts further into 2026, or even increase their bets if the data disappoints.

Additionally, the US Supreme Court has scheduled an “opinion day” tomorrow, which could potentially include a ruling on tariffs introduced during Trump’s administration.

Canadian Dollar (CAD) Update

Turning to the Canadian dollar, the Bank of Canada recently opted to keep interest rates unchanged at its latest policy meeting, refraining from endorsing market expectations for a rate hike. The central bank maintained a cautious stance, noting ongoing weaknesses in recent GDP and employment figures, despite acknowledging some areas of improvement.

The most recent inflation report from Canada showed the Trimmed Mean year-over-year rate easing to 2.8%, which was 0.1% below consensus and 0.2% lower than the previous month. This prompted a slightly more dovish shift in interest rate expectations. Looking ahead, tomorrow’s Canadian employment data could provide a lift for the CAD if the numbers come in strong.

USDCAD Technical Analysis – Daily Chart

Examining the daily timeframe, USDCAD has climbed higher over the past two weeks and is now approaching the significant 1.39 resistance level. Sellers may look to enter the market here, placing stops above resistance and aiming for a move down toward 1.3540. Conversely, a breakout above this resistance could encourage buyers to target a rally toward the 1.41 region.

USDCAD Technical Analysis – 4-Hour Chart

On the 4-hour chart, a strong support area has formed around the 1.38 level, where price has repeatedly bounced over the past month. An upward trendline reinforces this support, adding technical strength. Should the pair pull back to this zone, buyers may step in with stops below the trendline, aiming for a breakout above resistance. Sellers, meanwhile, will be watching for a breakdown below support to increase bearish positions, targeting the 1.3540 level.

USDCAD Technical Analysis – 1-Hour Chart

On the 1-hour timeframe, a minor ascending trendline is supporting the current bullish momentum. Buyers may find favorable risk-reward opportunities near this trendline to pursue new highs, while sellers will be alert for downside breaks to capitalize on potential new lows. The red lines on the chart indicate today’s average daily range.

Key Events Ahead

• Today: Release of the latest US Jobless Claims data.
• Tomorrow: US and Canadian labor market reports, along with a possible US Supreme Court decision regarding Trump-era tariffs.