USDCAD enters a key week with both FOMC and BOC meetings taking place, along with Canada’s CPI release. Recent data show unemployment is trending higher in Canada, while inflation remains at target. Research reports suggest inflation will stay near target through 2026 and 2027, while tariffs continue to weigh on the economy. In this environment, the Bank of Canada is expected to continue cutting rates at least twice more in the coming months. For this week’s meeting, markets are pricing in a 90 percent likelihood of a 25 basis point cut. 

In the US, unemployment remains low but largely due to changing structural dynamics. Overall, there is a clear weakening in the labor market, with risks tilted toward higher unemployment. While tariff effects on inflation are beginning to show, the pace is slower than expected. This gives the FOMC enough room to cut once or twice to rebalance policy in line with the new dynamics. While the Fed focuses on the economy, Trump is focusing on the Fed. His temporary replacement of Kruger, Miran, is expected to attend the FOMC meeting tomorrow for the first time. Trump also pushing to fire Cook but so far unsuccessfully. 

USDCAD 

Technically, USDCAD trended higher from 2021 until May, when it broke to the downside. Since then, the pair has repeatedly tested the broken trendline. It is now stuck between two strong zones: the resistance at 1.39–1.40, which includes the broken trendline, and the support at 1.35–1.36, which combines key horizontal support with the 200-day moving average. Both zones are very strong, and a clear break on either side could determine the medium-term direction. Whether this leads to a return to the trend or a selloff after the retest of the trendline will be the key question for USDCAD.