I have identified a clear head and shoulders pattern forming within a larger head and shoulders structure on the daily timeframe for USD/CAD, indicating a potential bearish reversal.
From a fundamental perspective, several key factors are contributing to the current weakness in the Canadian dollar against the US dollar:
Trade Tip
A strong close below the Entry line will be a perfect entry /4hr TF
Stoploss : Above the Left Shoulder (Red Rectangle)
In summary, the combination of a weakening Canadian economy, dovish BoC bias, lower oil prices, and interest rate divergence between the US and Canada all support a bearish outlook for USD/CAD, which aligns well with the bearish head and shoulders pattern I have spotted on the chart.
Not an Investment Advise
From a fundamental perspective, several key factors are contributing to the current weakness in the Canadian dollar against the US dollar:
- Canada's labor market showed significant weakness in August 2025, with a notable loss of 65.5 thousand jobs and a rise in unemployment to 7.1%, the highest in years. This has increased market expectations for monetary easing from the Bank of Canada (BoC).
- Although core inflation remains above target, the weak jobs data is pushing the BoC towards potential rate cuts or a more accommodative policy stance, which weighs on the Canadian dollar.
- The market is currently pricing in a very high chance (around 98%) of an additional rate cut by the BoC in September, following previous reductions to 2.75%. This dovish stance contrasts with the Federal Reserve’s more cautious or hawkish approach, creating a wider interest rate differential that supports US dollar strength.
- Additionally, declining oil prices, a major export for Canada, are exerting further downward pressure on the CAD.
- While recent US economic data has been mixed, the Fed is generally seen as less dovish than the BoC, sustaining demand for the USD.
- Trade tensions and geopolitical risks between the US and Canada add to concerns over Canada’s growth outlook, contributing to CAD depreciation risk.
Trade Tip
A strong close below the Entry line will be a perfect entry /4hr TF
Stoploss : Above the Left Shoulder (Red Rectangle)
In summary, the combination of a weakening Canadian economy, dovish BoC bias, lower oil prices, and interest rate divergence between the US and Canada all support a bearish outlook for USD/CAD, which aligns well with the bearish head and shoulders pattern I have spotted on the chart.
Not an Investment Advise
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Target 1 HittttGreat work guys!!
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