Facts
- The USDCAD exchange rate has been trading below the 100-period exponential moving average (EMA) since early April.
- Wages in Canada rose more than expected in May (3.5% YoY vs. 3.2% forecast), while unemployment matched expectations at 7%.
- Bloomberg’s OIS model forecasts one more rate cut in Canada and two in the U.S. in 2025.
Recommendation
- Trade idea: Short (Sell) USDCAD at market price
- Take Profit targets: 1.3600 (TP1), 1.3529 (TP2)
- Stop Loss: 1.3833
Source: xStation5
Opinion
USDCAD has been in a downtrend for nearly two months, as U.S. trade tensions with its closest neighbors have given way to an open trade war with China. The pair has consistently failed to break above the 30-day EMA (light violet), indicating persistent downward pressure.
The ongoing depreciation of USDCAD is supported by:
- Shifting sentiment against the U.S. dollar, driven by early signs of weak macroeconomic fundamentals, lack of fiscal discipline, and uncertainty surrounding future Trump administration decisions,
- Relative economic stability in Canada, reinforced by a stronger-than-expected labor market report today.
This report supports the Bank of Canada’s recent decision to hold rates, after its March cut which was primarily aimed at safeguarding growth amid tariff concerns linked to U.S. trade policies.
Meanwhile, the U.S. faces growing pressure to resume rate cuts.Recent macro data is mixed (very weak ADP, stable NFP, ISM showing contraction in services), but any further tilt toward recession risks will likely amplify market expectations for U.S. rate cuts, further weighing on the dollar.
Methodology
This recommendation is based on both yechnical analysis of the USDCAD chart and fundamental analysis of central bank monetary policy in Canada and the U.S.Take Profit levels were set using price action methodology, while the trade direction and Stop Loss were supported by exponential moving averages (EMAs). Stop Loss was placed above the shorter-term EMA30 to confirm a trend reversal before closing a losing position.
