USD/CAD Slips Toward 1.3855 as Fed Cut Bets Rise and BoC Stands Firm
USD/CAD traded near 1.3855 during Asian hours, extending its downward drift as traders increased their expectations for a Federal Reserve...
Quick overview
- USD/CAD is trading near 1.3855, influenced by increased expectations for a Federal Reserve rate cut this week.
- Mixed labor market data shows strong job openings but a slowdown in hiring, prompting speculation about Fed policy easing.
- The Bank of Canada is expected to maintain its current rates, supported by resilient Canadian growth data.
- The upcoming FOMC announcement is crucial, as it could determine the direction of the USD/CAD pair.
USD/CAD traded near 1.3855 during Asian hours, extending its downward drift as traders increased their expectations for a Federal Reserve rate cut at this week’s meeting. Markets are now pricing in a high probability that the Fed will deliver a 25-bp reduction, a move that continues to weigh on the U.S. dollar and limit its recovery attempts.
Fresh data has also shaped sentiment. ADP private sector hiring came in at 4.8 thousand, a pretty noticeable slowdown from last month’s free fall of 13.5 thousand. Meanwhile, JOLTS job openings ticked up to 7.67 million, actually beating out expectations of 7.14 million. So you get this really mixed picture: still pretty strong labor demand, but hiring isn’t exactly picking up speed – which is exactly what’s got the Fed thinking of easing up on policy.
With inflation gradually cooling and economic momentum slowing, traders expect Chair Jerome Powell to maintain an open pathway for additional easing in early 2026.
Canada Outlook Steady as BoC Holds Policy Line
In contrast, the Bank of Canada is widely expected to keep rates unchanged after signaling in October that the policy cycle has likely peaked. Stronger-than-expected Q3 GDP data has strengthened that message, helping cushion the Canadian dollar against broader U.S. dollar weakness.
Trade developments had little market impact. While Washington announced new tariff threats targeting Canadian fertilizer exports, investors largely dismissed the headlines, focusing instead on central-bank dynamics.
Key drivers supporting CAD:
- BoC expected to hold policy steady
- Canadian growth data remains resilient
- Fed–BoC divergence favors CAD strength
Fed Decision Now the Market’s Pivot Point
The real key moment comes when the FOMC announces on Wednesday. If Powell starts sounding cautious rather than super worried, the USD/CAD pair might struggle to move higher. But on the flipside, if the Fed resists cutting back too hard, the dollar might get a welcome boost.
USD/CAD Technical Analysis
USD/CAD is still following along with a pretty clear downward channel, hanging tight near 1.3855 after last week’s slide. The candles on the chart are really squished up tight down near the mid-channel trendline, showing that buyers are still struggling to get the upper hand, even though they managed a tiny bounce towards 1.3860.
The 20-EMA at 1.3851 has flattened, indicating slower momentum but not a structural shift. A breakout above 1.3893 would be the first sign of a recovery, opening space toward 1.3934.
Downside risks remain intact. A move below 1.3810 exposes 1.3773, followed by 1.3734, aligning with the channel’s lower boundary. The RSI at 50 supports a neutral tone, consistent with the pair’s sideways behavior. Unless USD/CAD breaks out of the descending channel, the broader trend still leans lower.
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