The USDCAD currency pair started today's trading session at 1.38394. The primary factor contributing to its recent slide was the weakening US dollar following Federal Reserve (Fed) Chairman Jerome Powell's speech at the Jackson Hole Symposium on August 22. Powell emphasized mounting labor market risks and hinted at a potential rate cut in September. This was seen as a clear dovish signal, which placed immediate pressure on the greenback and served as the key driver of the pair's initial downward movement.
Although the market has largely absorbed Powell's comments and quotes have partially recovered, a new uncertainty emerged when President Donald Trump attempted to dismiss Fed Governor Lisa Cook on August 26. His actions challenge the regulator's perceived institutional independence and create new risks for the US dollar. These political hazards have yet to be factored in, and the potential for legal conflict could keep weighing on the USD in the near term.
On the other hand, the Canadian dollar has seen a boost, partly due to the government's decision to lift retaliatory tariffs on a range of American products. This reduction in trade tensions has strengthened the national currency. Moreover, the Bank of Canada endeavors to ensure a more stable monetary policy by holding its rate at 2.75%. This is in stark contrast to the Fed, which is preparing for the first rate cut in a year. Canadian Central Bank's Governor Tiff Macklem reaffirmed the regulator's commitment to the 2% inflation target, instilling confidence in its actions.
From a technical perspective, USDCAD on the 4-hour chart displays expansion following a recent corrective decline. The price is now positioned between the EMA (20) and EMA (50) moving averages, reflecting market uncertainty. The Stochastic Oscillator is near the oversold zone, with %K at 24 and %D at 31, which suggests there might be a technical correction coming. Nevertheless, the overall bearish trend remains intact.
A recommendation to come into play:
Sell at the current price or wait for the correction to show up. Take Profit: 1.37950. Stop Loss: 1.38650.
This forecast is valid from August 27 till September 3, 2025.
This content is for informational purposes only and is not intended to be investing advice.
