Published: 11 December 2025,06:31
Daily Market Analysis New
*Canada’s economy is proving resilient, supported by steady consumer demand and improving labor-market conditions.
*The Bank of Canada kept rates at 2.25%, signaling confidence in inflation returning to 2% in 2026.
*U.S. tariffs, CUSMA negotiations, and fiscal uncertainties pose risks, but strong domestic demand and productivity gains offset some drag.
The Canadian dollar has strengthened broadly, supported by domestic economic resilience, steady central-bank policy, and a weakening U.S. dollar. The Bank of Canada held its policy rate at 2.25%, signaling confidence that inflation will stay near the 2% target through 2026. Although markets expected a more dovish tilt, Governor Tiff Macklem emphasized Canada’s “overall resilience,” citing improving labor conditions and stable consumer demand.
Inflation remains around 2.5%, but policymakers view current settings as appropriate for managing price pressures while guiding the economy through structural adjustments. The BoC remains alert to external risks including U.S. tariffs, CUSMA renegotiations, and fiscal uncertainty — estimating that prolonged trade conflict could reduce Canada’s GDP by about 1.5% by late 2026. Still, strong domestic consumption and productivity gains have softened the impact.
Canada’s housing market has stabilized, and business investment is being supported by major government spending programs, including the $280 billion multi-year infrastructure and competitiveness plan, which should boost long-term capacity without driving inflation higher.
From a currency standpoint, CAD benefits not only from domestic stability but also from U.S. political risk. Turmoil surrounding the Fed including questions over Governor appointments and speculation about a politically aligned future Chair makes CAD comparatively attractive. Firm commodity prices, especially energy and metals, add further support.
USD/CAD has moved toward the 1.38 area, with fundamentals and technicals pointing to continued downside risk. Going forward, CAD’s trajectory will hinge on the BoC’s patient, data-driven stance, U.S. tariff and political developments, and the durability of commodity strength. So long as oil remains stable and risk sentiment holds, the Canadian dollar appears fundamentally well-supported.
Technical Analysis
USDCAD continues to trade under clear bearish pressure after breaking below the major support at 1.3910 and failing to reclaim it on multiple retests. The pair has now extended its decline toward the 1.3815 – 1.3730 zone, where price is attempting to stabilize but still lacks any meaningful bullish reaction. The recent bounce was weak and quickly faded, indicating that sellers remain firmly in control.
Momentum indicators reinforce this bearish environment. The RSI currently sits near 26, deep in oversold territory, which shows strong bearish momentum but also signals that price may be reaching a short-term exhaustion point. While this could support a corrective bounce, there is no evidence yet of a meaningful reversal forming. The MACD remains firmly bearish, with both signal lines below zero and the histogram showing persistent negative values. Although the histogram has begun contracting slightly, this reflects only a slowdown in bearish velocity not a confirmed shift in trend.
Overall, USDCAD maintains a strongly bearish structure while trading below 1.3910 and failing to recover above the broken trendline. Any short-term rebounds would be corrective unless supported by a clear shift in momentum. For now, the outlook stays firmly bearish with the potential for mild oversold-driven pullbacks but no confirmed reversal.
Resistance level: 1.3815, 1.3910
Support level: 1.3730, 1.3650
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