USD/CAD Slides Toward Key Support as Traders Eye Inflation and Jobs Data

Key Moments

Fundamental Overview

US Dollar Dynamics

The US dollar has been under broad pressure since last week’s FOMC announcement. The Federal Reserve lowered rates by 25 bps in line with prior expectations and indicated that additional cuts would require a higher threshold. However, Fed Chair Jerome Powell’s remarks were interpreted as leaning dovish.

Instead of striking a strictly neutral and data-dependent tone, Powell played down upside inflation risks and concentrated more on signs of labor market softness. This communication suggested that the Fed may be more willing to tolerate higher inflation than notable deterioration in employment conditions.

Attention is now shifting to the upcoming US Nonfarm Payrolls (NFP) and Consumer Price Index (CPI) releases, which are set to shape the final significant trading stretch of the year before holiday-related liquidity declines. At present, markets are discounting 57 bps of easing by the end of 2026.

Stronger-than-expected US data, particularly on the labor front, would likely drive a hawkish repricing of the Fed path, providing renewed support for the dollar. Conversely, weaker numbers would likely drag the greenback lower as traders move forward expectations for rate cuts.

Canadian Dollar and BoC Outlook

On the Canadian side, the Bank of Canada left policy rates unchanged last week and stopped short of endorsing the market’s pricing for future hikes. Policymakers maintained a cautious tone, noting soft details in recent GDP and employment figures, even as they acknowledged areas of improvement. Markets are still fully pricing in a rate hike by the end of 2026.

The latest Canadian inflation print is due today. The key gauge to monitor is the Trimmed Mean CPI year-over-year measure, which is forecast at 2.9% compared with the prior 3.0% reading.

If the Trimmed Mean CPI comes in below expectations, the Canadian dollar could weaken as traders trim rate hike wagers. If the data exceeds forecasts – with larger upside surprises likely provoking stronger reactions – CAD could appreciate as markets bring forward the timing of potential BoC tightening.

AUD/CAD 🇦🇺🇨🇦 | Trade Update ✍️

This trade has become somewhat stale, now having been in it for a week and with little progress.

I have been contemplating cutting it. However, I maintain a fundamentals backing to be bullish on the pair still ahead of Canada's CPI reading today.… https://t.co/jt9gYYHC5a pic.twitter.com/dRFSQadIjZ

— 9 to 5 to Markets (@9to5toMarkets) December 15, 2025

USD/CAD Technical Picture – Daily Chart

On the daily timeframe, USD/CAD extended its decline after breaking a major trendline following a notably strong Canadian employment release. The pair has now fallen to 3-month lows and is edging closer to an important swing level around 1.3725.

At this area, dip buyers may attempt to enter with risk defined just below the level, aiming for a rebound toward the 1.39 handle. In contrast, sellers will be watching for a decisive move beneath this zone to reinforce the downtrend and potentially target the 1.3550 region next.

USD/CAD Technical Picture – 4-Hour Chart

The 4-hour chart shows a descending trendline that is currently guiding the bearish momentum. Should price retrace back toward this trendline, sellers are likely to lean against it, keeping risk controlled above the line while positioning for a continuation lower into fresh lows.

Buyers, meanwhile, will be looking for a clear break above this trendline as a signal to build long positions, with an eye on a move back toward the 1.39 handle.

USD/CAD Technical Picture – 1-Hour Chart

On the 1-hour timeframe, a minor support zone has formed near 1.3754. Buyers are expected to defend this level, placing stops just below and aiming for a corrective move back toward the descending trendline seen on the higher timeframes.

Sellers, in contrast, are likely to wait for a breakdown through this support to reengage on the short side, targeting the September lows in the vicinity of 1.3725. The red lines on the chart mark the average daily range for the current session.

Key USD/CAD Levels

Upcoming Market Catalysts

The immediate event risk is today’s Canadian CPI release, which will feed directly into expectations for the Bank of Canada’s policy path and CAD performance.

Tomorrow, the US NFP report will provide a fresh read on the labor market, followed by US CPI on Thursday. Together, these releases will be pivotal for USD/CAD as traders recalibrate views on relative central bank trajectories and short-term rate differentials.