The USD/CAD pair is trading firmly around 1.3850 during Wednesday’s Asian session, consolidating near Tuesday’s peak. The Canadian Dollar (CAD) remains under pressure as investors anticipate the Bank of Canada (BoC) will resume its easing cycle after pausing in April.
BOC outlook weighs on CAD
Dovish expectations on the BoC have intensified following signs of a weakening Canadian labor market. Analysts at Bank of America (BofA) forecast a 25 bps rate cut at next week’s policy meeting, which would lower borrowing costs to 2.5%. The bank also expects rates to decline to 2% by the end of 2026, citing a rising unemployment rate and inflation stabilizing within the BoC’s 2% target band.
USD steadies ahead of PPI release
The US Dollar (USD) holds its recovery momentum as markets await the August Producer Price Index (PPI) report due at 12:30 GMT. Headline PPI is expected to rise 3.3% year-on-year, while core PPI is projected at 3.5% compared with 3.7% in July. These figures will be closely monitored for clues on the Federal Reserve’s next policy steps.
Technical outlook: 200-ema caps upside
USD/CAD continues to trade below the 200-day Exponential Moving Average (EMA) around 1.3870, keeping the broader trend bearish. The 14-day Relative Strength Index (RSI) remains range-bound between 40.00 and 60.00, suggesting sideways momentum.
Immediate support lies at the August 7 low of 1.3722. A breakdown could open the way toward the psychological 1.3600 level and the June 16 low of 1.3540. On the upside, a move above the August 22 high at 1.3925 would expose the May 15 high of 1.4000, followed by the April 9 low at 1.4075.
