Weakening Momentum But Bullish Bias Persists in USD/CAD

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3690-1.3940

Euro                 1.6110-1.6360

Sterling            1.8620-1.8870

WTI Oil (opening level) $62.70

The CAD/USD is opening at 1.3807 ( 0.7243 )

The USD/CAD pair has traded above 1.3800 and has moved below the nine-day Exponential Moving Average (EMA), suggesting the short-term price momentum is weakening. However, the 14-day Relative Strength Index is still positioned slightly above the 50 level, indicating that bullish bias is in play.

On the upside, the USD/CAD pair is testing the nine-day EMA at 1.3801. A break above this level would improve the short-term price momentum and lead the pair to explore the region around the four-month high at 1.3924, which was recorded on August 22, followed by the upper boundary of the ascending channel around 1.3970. Further barrier lies at the five-month high at 1.4016, reached on May 13.

Remember this is mostly based on the idea that interest rates in both the USA and Canada will be giong lower in the coming days.

Headlines

·    US consumer inflation expectations for the year ahead increased to 3.2% in August 2025 from 3.1% in July. Expected cost changes fell for college education (-0.9 to 7.8%), rent (-1.0 to 6.0%), and medical care (-0.4 to 8.8%).

·    Norway’s ruling centre-left party coalition claimed victory in Norway’s elections, and appears set to take 88 seats in the 169-seat legislature.

·    French PM Bayrou lost the confidence vote in the National Assembly, as expected, and will now need to tender his resignation.

·    UK retail sales grew 2.9% year-on-year in August 2025, the strongest in four months, exceeding July's 1.8% and forecasts of 2%. Warm weather increased demand, but the rise was largely due to higher food prices. Food sales rose 4.7%, non-food 1.8%. Modest online gains suggest cautious spending. Retailers are wary of consumer confidence ahead of Christmas, amid high costs and budget uncertainty.

·    Germany's trade surplus shrank to EUR 14.9 billion in July 2025 from EUR 15.4 billion in June, the smallest since October 2024, as exports fell more than imports. Exports dropped 0.6% to EUR 130.2 billion, with sales to non-EU countries down 4.5%, including a 7.9% decrease to the US. Conversely, shipments to EU countries rose by 2.5%.

·    China's exports rose 4.4% in August 2025 to USD 321.8 billion, below expectations and the slowest since February, due to tariff easing and reduced demand. A 90-day tariff truce with the US kept tariffs at 30% and 10%. Exports grew to Japan, Taiwan, Australia, ASEAN, and the EU.

Key Points

·    Equities: U.S. markets rose as FED-cut hopes prevailed; Europe advanced; Asia firmer with Hong Kong up on reserves data and chip-policy headlines

·    Volatility: VIX mid-teens; low risk pricing; SPX move ±22 pts; payrolls watch

·    Digital Assets: BTC steady; ETF flows split; ETH consolidates; altcoins rangebound

·    Fixed Income: US Treasury yields fall further – 10-year benchmark nearly to 4.00%

·    Currencies: USD weakens further, with JPY stumbling

·    Commodities: Overbought gold hits another record amid frenzied rate-cut focus