The US dollar was under pressure and fluctuated ahead of the US non-farm payroll data, with the USD/CAD pair maintaining a range-bound trading pattern.
2025-12-16 13:55:42
The USD/CAD pair traded with low volatility during Tuesday's Asian trading session, consolidating around 1.3775. Market sentiment was cautious, primarily due to the upcoming release of the delayed US non-farm payrolls report.
This non-farm payroll data will combine the employment figures for October and November and is considered a key indicator of the resilience of the US labor market. The US dollar has been generally weak, with the dollar index hovering around 98.15, near an eight-week low.
Previously, the Federal Reserve had cut interest rates by a total of 75 basis points, lowering the policy rate to 3.50%–3.75%, and its policy shift was largely driven by signs of a cooling labor market.
Therefore, the upcoming non-farm payroll data is crucial for the market to judge the Fed's next policy path. Currently, the market generally expects the US unemployment rate to remain at 4.4% in November. If the data continues to show weak employment demand, it may further strengthen expectations for easing policies, thus putting sustained pressure on the US dollar.
Besides the non-farm payroll data, the US November retail sales data and the preliminary December S&P Global Purchasing Managers Index will also be closely watched. The market expects retail sales to grow by 0.2% month-on-month. If consumption remains robust, it may provide some buffer for the US dollar in the short term, but the overall impact still needs to be assessed in conjunction with the employment and inflation outlook.
In contrast, the Canadian dollar remained relatively stable. Data from Canada's November Consumer Price Index showed that the overall annual inflation rate was 2.2%, slightly lower than market expectations, but still maintaining moderate growth.
After excluding highly volatile items, the Bank of Canada's core inflation gauge remained at 2.9%, indicating that underlying inflationary pressures remain within a manageable range. The Bank of Canada previously stated that underlying inflation is roughly around 2.5%, and expects inflation to generally stay close to the 2% policy target, assuming that economic slack and cost pressures offset each other.
This statement led to relatively stable market expectations regarding the Bank of Canada's policy, resulting in a lack of clear directional momentum for the Canadian dollar. Overall, ahead of the release of key US data, the USD/CAD pair tended to consolidate, with both bulls and bears remaining cautious.
From a technical perspective, the USD/CAD pair remains within a short-term trading range. The recent pullback failed to break below key support, indicating some buying interest, but the upward momentum is also limited, reflecting a lack of clear direction in the market ahead of major data releases.
On the downside chart, the area around 1.3750 forms a crucial short-term support zone, repeatedly limiting price declines. A decisive break below this level could see the price move further towards the psychological level of 1.3700, potentially opening up further downside potential. If 1.3700 is breached, the short-term technical structure will weaken significantly.
On the upside, the 1.3800 level is currently the primary resistance, and this area is also close to the upper edge of the previous consolidation range. If the exchange rate regains this level driven by US data, the upside target may be around 1.3850. However, given the overall weakness of the US dollar, the upside potential may still be limited without sustained positive fundamental factors.
Overall, the technical analysis suggests that the USD/CAD pair is in a consolidation phase before a directional move, and the breakout of key support and resistance levels will provide important guidance for its subsequent movement.
Editor's Note:
The current sideways movement of the USD/CAD pair reflects the market's high sensitivity to the Federal Reserve's policy outlook. The performance of the US non-farm payroll data may be the key trigger to break this consolidation pattern.
With relatively stable inflation and clear policy expectations in Canada, the short-term direction of the exchange rate will depend more on changes in the US dollar. If US data continues to be weak, the USD/CAD pair faces the risk of further decline; conversely, stronger-than-expected data may only bring a temporary rebound.
This non-farm payroll data will combine the employment figures for October and November and is considered a key indicator of the resilience of the US labor market. The US dollar has been generally weak, with the dollar index hovering around 98.15, near an eight-week low.
Previously, the Federal Reserve had cut interest rates by a total of 75 basis points, lowering the policy rate to 3.50%–3.75%, and its policy shift was largely driven by signs of a cooling labor market.
Therefore, the upcoming non-farm payroll data is crucial for the market to judge the Fed's next policy path. Currently, the market generally expects the US unemployment rate to remain at 4.4% in November. If the data continues to show weak employment demand, it may further strengthen expectations for easing policies, thus putting sustained pressure on the US dollar.
Besides the non-farm payroll data, the US November retail sales data and the preliminary December S&P Global Purchasing Managers Index will also be closely watched. The market expects retail sales to grow by 0.2% month-on-month. If consumption remains robust, it may provide some buffer for the US dollar in the short term, but the overall impact still needs to be assessed in conjunction with the employment and inflation outlook.
In contrast, the Canadian dollar remained relatively stable. Data from Canada's November Consumer Price Index showed that the overall annual inflation rate was 2.2%, slightly lower than market expectations, but still maintaining moderate growth.
After excluding highly volatile items, the Bank of Canada's core inflation gauge remained at 2.9%, indicating that underlying inflationary pressures remain within a manageable range. The Bank of Canada previously stated that underlying inflation is roughly around 2.5%, and expects inflation to generally stay close to the 2% policy target, assuming that economic slack and cost pressures offset each other.
This statement led to relatively stable market expectations regarding the Bank of Canada's policy, resulting in a lack of clear directional momentum for the Canadian dollar. Overall, ahead of the release of key US data, the USD/CAD pair tended to consolidate, with both bulls and bears remaining cautious.
From a technical perspective, the USD/CAD pair remains within a short-term trading range. The recent pullback failed to break below key support, indicating some buying interest, but the upward momentum is also limited, reflecting a lack of clear direction in the market ahead of major data releases.
On the downside chart, the area around 1.3750 forms a crucial short-term support zone, repeatedly limiting price declines. A decisive break below this level could see the price move further towards the psychological level of 1.3700, potentially opening up further downside potential. If 1.3700 is breached, the short-term technical structure will weaken significantly.
On the upside, the 1.3800 level is currently the primary resistance, and this area is also close to the upper edge of the previous consolidation range. If the exchange rate regains this level driven by US data, the upside target may be around 1.3850. However, given the overall weakness of the US dollar, the upside potential may still be limited without sustained positive fundamental factors.
Overall, the technical analysis suggests that the USD/CAD pair is in a consolidation phase before a directional move, and the breakout of key support and resistance levels will provide important guidance for its subsequent movement.
Editor's Note:
The current sideways movement of the USD/CAD pair reflects the market's high sensitivity to the Federal Reserve's policy outlook. The performance of the US non-farm payroll data may be the key trigger to break this consolidation pattern.
With relatively stable inflation and clear policy expectations in Canada, the short-term direction of the exchange rate will depend more on changes in the US dollar. If US data continues to be weak, the USD/CAD pair faces the risk of further decline; conversely, stronger-than-expected data may only bring a temporary rebound.
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