5 August 2025,03:24
Daily Market Analysis
5 August 2025, 03:24
Key Takeaways:
*U.S. tariffs cloud outlook; high-level talks key to CAD recovery.
*Weak oil prices and slowing global demand cap commodity support.
*Friday’s jobs data could trigger BoC dovish repricing if hiring slows.
Market Summary:
The Canadian Dollar is trading cautiously near 1.3780 against the U.S. Dollar, with market sentiment tethered to a volatile mix of trade policy uncertainty, oil market weakness, and an increasingly data-sensitive Bank of Canada (BoC). While the Loonie found some footing following last Friday’s broad-based USD retreat, risks remain skewed to the downside as investors brace for pivotal domestic labor data later this week.
Trade tensions between the U.S. and Canada have intensified following President Trump’s announcement of a sweeping 35% tariff package targeting Canadian steel, aluminum, and autos. With high-level negotiations between Prime Minister Mark Carney and the White House underway, markets are on edge. A failure to de-escalate could trigger further weakness in the CAD, especially if retaliatory measures emerge.
Oil prices have done little to support the commodity-linked currency. Brent crude remains under pressure following the OPEC+ decision to raise output and amid persistent concerns about sluggish global demand. For a resource-reliant economy like Canada’s, this dynamic continues to undercut export revenues and weigh on inflation-linked expectations.
From a monetary policy perspective, the spotlight turns to Canada’s jobs report due Friday. Analysts expect a sharp slowdown in hiring (forecast: +15.3K vs. June’s +83.1K), and a downside surprise could solidify BoC rate-cut expectations. That would further widen the policy gap with the Federal Reserve, though softening U.S. data and political instability have already weighed on the greenback.
Overall, USD/CAD remains biased to the upside, with a potential move beyond 1.3850 if jobs data miss expectations or U.S.-Canada trade talks falter. However, any sustained rally in the pair would likely require confirmation from oil markets or a decisive dovish turn from the BoC, neither of which is yet assured.
Technical Analysis
USD/CAD remains under modest downside pressure, currently trading near 1.3770 after retreating from the recent 1.3855 swing high. The pair has slipped below the 20-SMA and 50-SMA on the chart, while hovering just above the 100-SMA at 1.3747 that is a key pivot level that coincides with a minor demand zone. Price action appears to be forming a lower high structure, signaling potential trend exhaustion. A break below 1.3750 would expose the next key support at 1.3650, which aligns with the early July consolidation base.
Momentum indicators tilt cautiously bearish. The RSI is weakening, last seen around 45 and pointing downward without signs of bullish divergence. Meanwhile, the MACD has shifted into negative territory, with the signal line confirming a bearish crossover and histogram bars expanding lower indicating a gradual increase in downside momentum. Volume has begun to decline, hinting at hesitation from buyers and a possible transition into a correction phase.
Overall, the short-term technical outlook leans bearish, with weakening momentum, fading buying pressure, and price action signaling downside risk. Unless buyers reclaim key resistance levels with volume confirmation, the path of least resistance appears to be lower.
Resistance Levels: 1.3855, 1.3965
Support Levels: 1.3750, 1.3650
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