The Canadian dollar's fundamentals strengthened, and the USD/CAD pair returned to the lower end of its trading range.
2026-02-10 10:03:05
On Tuesday during Asian trading hours, the US dollar rose to around 1.3560 against the Canadian dollar, ending a two-day losing streak.
However, from an overall fundamental perspective, the upward momentum of the exchange rate remains limited, and downside risks have not been completely eliminated. The Canadian dollar has recently received significant support, mainly due to the continued improvement in Canada's domestic fundamentals.
Latest data shows that Canada's unemployment rate fell to 6.5% in January, the lowest level since September 2024. Meanwhile, full-time employment rose nearly 3.3% year-on-year, indicating that the labor market remains resilient.
This performance weakened market expectations for a near-term interest rate cut by the Bank of Canada, keeping Canadian dollar assets relatively attractive in terms of real yields. Against this backdrop, foreign capital flowed back into Canadian assets, coupled with relatively strong commodity prices such as energy, providing additional support for the Canadian dollar.
This means that even with a technical rebound, the USD/CAD pair still faces strong selling pressure. Meanwhile, the market is awaiting guidance from key US macroeconomic data. The delayed January jobs report and the upcoming Consumer Price Index will be crucial indicators of the pace of the US economic slowdown and the Federal Reserve's policy path.
The market generally expects the Federal Reserve to keep interest rates unchanged at its March meeting, with the first rate cut likely to occur in June, and further adjustments possible later this year. Furthermore, declining US inflation expectations are also putting some downward pressure on the dollar.
The latest survey shows that one-year inflation expectations have fallen to 3.1%, a six-month low, reflecting increased market confidence in a continued decline in inflation. While sub-items such as food prices remain stable, overall inflation expectations are moderating, marginally weakening the dollar's interest rate advantage.
From a technical perspective, the USD/CAD pair has rebounded slightly after a period of decline, but it remains within a generally weak and volatile pattern. The daily chart shows that the exchange rate is currently constrained by short-term moving averages, limiting its upside potential.
The previous downward trend has not been completely broken, and the price center is still slowly moving downwards, indicating that the bearish structure has not yet reversed. The current 1.3560 level is more of a technical correction than a trend reversal signal.
On the downside, the 1.3520 level forms initial short-term support. If this level is breached, the exchange rate may further test the 1.3480 area, which corresponds to the lower edge of the previous trading range and is also a key emotional support level. If this area is broken, the 1.3420 level will become a crucial medium-term support point to watch.
On the upside, the 1.3580-1.3600 range presents significant resistance. This area coincides with short-term moving averages and previous consolidation highs; failure to break through this level could weaken the upward momentum of the exchange rate. Until a clear bullish signal for the US dollar emerges from the fundamentals, the upside potential for USD/CAD is expected to remain limited.
Overall, the technical pattern for USD/CAD remains weak and volatile, with rebounds largely reflecting corrective movements.
Editor's Note:
The current rebound in the USD/CAD exchange rate appears more like a short-term technical correction than a trend reversal. The resilience of the Canadian labor market has weakened market expectations for further central bank easing, allowing the Canadian dollar to maintain a relative advantage among major currencies.
Ahead of key US data releases, the exchange rate may remain range-bound, but the overall bias is towards a downside risk. Subsequent movements will depend on the repricing of expectations regarding Federal Reserve policy and the direction of the US dollar.
However, from an overall fundamental perspective, the upward momentum of the exchange rate remains limited, and downside risks have not been completely eliminated. The Canadian dollar has recently received significant support, mainly due to the continued improvement in Canada's domestic fundamentals.
Latest data shows that Canada's unemployment rate fell to 6.5% in January, the lowest level since September 2024. Meanwhile, full-time employment rose nearly 3.3% year-on-year, indicating that the labor market remains resilient.
This performance weakened market expectations for a near-term interest rate cut by the Bank of Canada, keeping Canadian dollar assets relatively attractive in terms of real yields. Against this backdrop, foreign capital flowed back into Canadian assets, coupled with relatively strong commodity prices such as energy, providing additional support for the Canadian dollar.
This means that even with a technical rebound, the USD/CAD pair still faces strong selling pressure. Meanwhile, the market is awaiting guidance from key US macroeconomic data. The delayed January jobs report and the upcoming Consumer Price Index will be crucial indicators of the pace of the US economic slowdown and the Federal Reserve's policy path.
The market generally expects the Federal Reserve to keep interest rates unchanged at its March meeting, with the first rate cut likely to occur in June, and further adjustments possible later this year. Furthermore, declining US inflation expectations are also putting some downward pressure on the dollar.
The latest survey shows that one-year inflation expectations have fallen to 3.1%, a six-month low, reflecting increased market confidence in a continued decline in inflation. While sub-items such as food prices remain stable, overall inflation expectations are moderating, marginally weakening the dollar's interest rate advantage.
From a technical perspective, the USD/CAD pair has rebounded slightly after a period of decline, but it remains within a generally weak and volatile pattern. The daily chart shows that the exchange rate is currently constrained by short-term moving averages, limiting its upside potential.
The previous downward trend has not been completely broken, and the price center is still slowly moving downwards, indicating that the bearish structure has not yet reversed. The current 1.3560 level is more of a technical correction than a trend reversal signal.
On the downside, the 1.3520 level forms initial short-term support. If this level is breached, the exchange rate may further test the 1.3480 area, which corresponds to the lower edge of the previous trading range and is also a key emotional support level. If this area is broken, the 1.3420 level will become a crucial medium-term support point to watch.
On the upside, the 1.3580-1.3600 range presents significant resistance. This area coincides with short-term moving averages and previous consolidation highs; failure to break through this level could weaken the upward momentum of the exchange rate. Until a clear bullish signal for the US dollar emerges from the fundamentals, the upside potential for USD/CAD is expected to remain limited.
Overall, the technical pattern for USD/CAD remains weak and volatile, with rebounds largely reflecting corrective movements.
Editor's Note:
The current rebound in the USD/CAD exchange rate appears more like a short-term technical correction than a trend reversal. The resilience of the Canadian labor market has weakened market expectations for further central bank easing, allowing the Canadian dollar to maintain a relative advantage among major currencies.
Ahead of key US data releases, the exchange rate may remain range-bound, but the overall bias is towards a downside risk. Subsequent movements will depend on the repricing of expectations regarding Federal Reserve policy and the direction of the US dollar.
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