USD/CAD edged higher as weak Canadian data bolstered expectations of a rate cut
2025-09-12 14:20:21
USD/CAD edged higher in Asian trading on Friday, trading around 1.3840. The dollar continued to rebound after rising about 0.25% in the previous session, with the market focused on the University of Michigan's consumer confidence index to be released later.
Despite a short-term rebound in the US dollar, its potential upside remains limited. The US Consumer Price Index (CPI) rose 2.9% year-on-year in August, in line with expectations but higher than July's 2.7%. It also rose 0.4% month-on-month, 0.2% higher than the previous reading. The core CPI rose 3.1% year-on-year, in line with expectations.
At the same time, the number of initial jobless claims in the United States rose to 263,000, the highest level since 2021, higher than the market expectation of 235,000 and the revised previous value of 236,000. This shows that the weakness in the job market may support the Federal Reserve's 25 basis point interest rate cut next week, and the possibility of a half percentage point rate cut is also increasing.
Analysts believe that the weak employment data has increased market bets on the Federal Reserve to cut interest rates, limiting further strength of the US dollar.
Meanwhile, weak Canadian labor and inflation data have further fueled market expectations for a near-term rate cut by the Bank of Canada. Market expectations for a rate cut next week are currently around 70%, and weak CPI data could further increase expectations, providing support for the USD/CAD pair.
Experts pointed out that the weakness in Canada's economic data increases the possibility of the BoC adopting an accommodative monetary policy.
From the daily chart, USD/CAD has recently rebounded to around 1.3840. Short-term resistance is at 1.3865 and 1.3890. If it breaks through the resistance, it may test the 1.3920 area. The support below is at 1.3810 and 1.3785. If it falls back to the support area, it may trigger a short-term buying rebound.
The RSI indicator remains around 55, indicating that there is still some upward momentum, but if the market's expectations for the Fed's interest rate cuts further increase, it may trigger a decline in the US dollar.
Editor's opinion:
Overall, the USD/CAD rebound is primarily driven by short-term technical corrections and market expectations of a Canadian interest rate cut. Weak US employment data and a high CPI continue to create uncertainty about the Fed's policy direction.
The short-term focus remains on the subsequent performance of US consumer confidence data and Canadian CPI and employment data, while paying attention to whether the 1.3865-1.3890 resistance zone can be effectively broken through.
Despite a short-term rebound in the US dollar, its potential upside remains limited. The US Consumer Price Index (CPI) rose 2.9% year-on-year in August, in line with expectations but higher than July's 2.7%. It also rose 0.4% month-on-month, 0.2% higher than the previous reading. The core CPI rose 3.1% year-on-year, in line with expectations.
At the same time, the number of initial jobless claims in the United States rose to 263,000, the highest level since 2021, higher than the market expectation of 235,000 and the revised previous value of 236,000. This shows that the weakness in the job market may support the Federal Reserve's 25 basis point interest rate cut next week, and the possibility of a half percentage point rate cut is also increasing.
Analysts believe that the weak employment data has increased market bets on the Federal Reserve to cut interest rates, limiting further strength of the US dollar.
Meanwhile, weak Canadian labor and inflation data have further fueled market expectations for a near-term rate cut by the Bank of Canada. Market expectations for a rate cut next week are currently around 70%, and weak CPI data could further increase expectations, providing support for the USD/CAD pair.
Experts pointed out that the weakness in Canada's economic data increases the possibility of the BoC adopting an accommodative monetary policy.
From the daily chart, USD/CAD has recently rebounded to around 1.3840. Short-term resistance is at 1.3865 and 1.3890. If it breaks through the resistance, it may test the 1.3920 area. The support below is at 1.3810 and 1.3785. If it falls back to the support area, it may trigger a short-term buying rebound.
The RSI indicator remains around 55, indicating that there is still some upward momentum, but if the market's expectations for the Fed's interest rate cuts further increase, it may trigger a decline in the US dollar.
Editor's opinion:
Overall, the USD/CAD rebound is primarily driven by short-term technical corrections and market expectations of a Canadian interest rate cut. Weak US employment data and a high CPI continue to create uncertainty about the Fed's policy direction.
The short-term focus remains on the subsequent performance of US consumer confidence data and Canadian CPI and employment data, while paying attention to whether the 1.3865-1.3890 resistance zone can be effectively broken through.
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- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
