Break Through the Downward Channel! Is USDCAD Turning Danger into Safety?

Forex

Technical Analysis

Summary:

The Bank of Canada has opted to keep the benchmark interest rate unchanged at 2.25%, considering the current monetary policy stance to be "broadly appropriate." This decision has curbed market expectations of imminent aggressive easing measures, thereby providing support to the Canadian dollar.

BUY USDCAD

Close Time

CLOSED

1.37782

Entry Price

1.42000

1.35700

1.37807 -0.00167 -0.12%

5.5

Pips

Profit

1.35700

1.37837

Exit Price

1.37782

Entry Price

1.42000

Fundamentals

The Bank of Canada has decided to keep interest rates steady at 2.25%, considering the policy to be "roughly appropriate," which suppresses market expectations of recent aggressive easing measures and supports the Canadian dollar. Meanwhile, Canadian inflation data shows the overall CPI stabilizing at 2.2%, with the core inflation rate dropping to 2.8%, the lowest in ten months, reinforcing confidence that price pressures are aligning with the Bank of Canada's inflation target. On Wednesday, crude oil prices extended prior declines, with Brent crude dropping below US$60 per barrel for the first time since May, reflecting increasingly evident signs of global supply exceeding demand. Amid increased production from OPEC members and non-Middle Eastern countries, the International Energy Agency forecasts a significant oversupply in the global oil market this year and next, with the surplus potentially reaching record highs next year. Market structure indicators showed that some Middle Eastern and U.S. Gulf Coast crude grades briefly shifted to contango, signaling rising inventory pressures, although some regions maintained backwardation, indicating localized supply tightness. While declining oil prices partly ease inflationary pressures, expectations of an imminent resolution to the Ukraine conflict continue to exert downward pressure on market sentiment. Ukraine has indicated efforts to negotiate a legally binding security arrangement, with recent rounds of talks held in Berlin between Ukrainian representatives and U.S. officials. Market observers note that the news cycle surrounding the Russia-Ukraine situation is weighing on spot prices, but the prospects for substantive breakthroughs in negotiations remain uncertain. The decline in oil prices alleviates inflationary pressures and provides major economies' central banks with increased policy flexibility. In the United States, recent data shows a gradual slowdown in economic momentum. Non-farm employment rebounded in November after significant declines, but the unemployment rate rose to 4.6%, the highest in over four years. However, this data is limited in its reliability due to statistical distortions caused by the prolonged federal government shutdown. Employment growth is concentrated in healthcare and construction sectors, while government and transportation-related positions continue to decline, with wage growth also decelerating, indicating a gradual cooling of the labor market.

The mixed labor market data has not bolstered market expectations for further Federal Reserve interest rate cuts. The November employment report showed an increase of 64,000 jobs, slightly above forecasts, but the October figures were significantly revised downward, with the unemployment rate rising to 4.6%, the highest since 2021, indicating a gradual cooling of the labor market. Retail sales remained flat month-over-month, further suggesting waning consumer demand. Federal Reserve officials are divided on whether additional monetary policy easing will be necessary next year. The median forecast among Fed policymakers is a single rate cut in 2026, though some policymakers anticipate no further cuts. Meanwhile, traders are pricing in two rate reductions next year. According to The Wall Street Journal, U.S. President Donald Trump is scheduled to interview Federal Reserve Board member Christopher Waller on Wednesday to assess his suitability for the Fed Chair position. An October poll indicated that Waller is the economists' leading choice, as his rationale for rate cuts this year is viewed as the most logically consistent and capable of resolving internal Fed disagreements.

Technical Analysis

In the 1D timeframe, the price has broken below the EMA200 and is trending along the lower Bollinger Band, but a bullish engulfing pattern has emerged, breaking out of the downtrend channel, indicating a potential short-term rebound. After the MACD death cross, the MACD line and signal line fell below the zero-axis, signaling a shift to a bearish trend. The RSI at 32 indicates the market is in oversold territory, suggesting the decline is not yet exhausted but a rebound could occur at any time. In the 4H timeframe, Bollinger Bands are converging and narrowing, with SMAs converged. Following the MACD golden cross, the MACD line and signal line are retracing toward the zero-axis, yet still have some distance to go, implying the rebound is incomplete. Resistance levels are near the EMA50 and EMA200, at approximately 1.381 and 1.393, respectively. The RSI at 48 indicates a neutral market sentiment. It is recommended to go long before going short.

Break Through the Downward Channel! Is USDCAD Turning Danger into Safety?_1

Break Through the Downward Channel! Is USDCAD Turning Danger into Safety?_2

Trading Recommendations

Trading Direction: Buy

Entry Price: 1.378

Target Price: 1.42

Stop Loss: 1.357

Support: 1.373, 1.37, 1.357

Resistance: 1.414, 1.42, 1.44

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Tank

Forex

Technical Analysis

Summary:

U.K. CPI inflation, as measured by the Office for National Statistics, dropped to 3.2% YoY in November. Following the release, GBPUSD slid to the 1.3330 handle.

SELL GBPUSD

EXP

TRADING

1.33303

Entry Price

1.29000

1.35000

1.34193 +0.00464 +0.35%

0.0

Pips

Flat

1.29000

Exit Price

1.33303

Entry Price

1.35000

Fundamentals

According to the UK Office for National Statistics, headline CPI inflation dropped to 3.2% in November. Following the release, GBPUSD slid to the 1.333 area.

S&P Global figures published on Tuesday showed the UK Composite PMI at 52.1, beating both the consensus forecast of 51.4 and the prior 51.2. Both the Services and Manufacturing PMIs jumped to 52.1 and 51.2 respectively, surpassing market expectations. The improvement in the dominant services sector lifted sentiment and lent GBPUSD some support.

Nevertheless, money markets still price in a Bank Rate cut on Thursday, capping upside for the pair. A 25 bp reduction to 3.75% is fully discounted for the December MPC meeting.

"We continue to think the BoE will cut faster than markets currently price, with the Bank Rate declining to 3% by the end of 2026. The PMI data does not change that view," said Jefferies economist Modupe Adegbembo.

Fed officials remain divided over the necessity of further policy accommodation in 2026. The central tendency of the Summary of Economic Projections (SEP) indicates a solitary 25 bp reduction in the federal funds target range for 2026. However, a non-trivial cohort of Committee members now deem the policy rate to be at, or near, its terminal level.

In contrast, traders are pricing in two cuts over the same horizon, with the CME Group's FedWatch model assigning a 75.6% probability that the Fed will stand pat at the January meeting, up from roughly 70% a week earlier.

November's non-farm payroll report sent mixed signals about the pace of labour-market cooling: hiring rebounded after October's weather-distorted plunge, yet the unemployment rate rose in tandem. Both prints were heavily contaminated by the recent federal-government shutdown, and investors broadly regard them as insufficient to alter the near-term policy outlook. The Bureau of Labour Statistics reported that payrolls expanded by 64,000 in November, beating the consensus forecast of 50,000, while the October print—revised down by 105,000 after more than 150,000 federal workers accepted deferred-buyout packages—now shows a decline of 105,000. The unemployment rate ticked up to 4.6% from 4.5%, matching the median survey estimate for end-2025 that has prevailed over the past three quarters.

Technical Analysis

A textbook dark-cloud-cover formation has appeared on Cable's daily chart. The MACD fast line is within one session of crossing below the slow line, while RSI has completed a lower-high sequence, warning of an imminent corrective leg. A decisive close beneath the EMA12 would invalidate the bounce and expose layered support at the EMA200 (1.325) and the lower Bollinger band (1.303). RSI sits at 55, classic watch-and-wait terrain.

On the weekly chart, price remains compressed beneath the middle Bollinger. MACD has mean-reverted to the zero axis but has not yet registered a bullish crossover. A successful golden cross would open the upper Bollinger and the prior structural high. Failure would re-target the EMA200. RSI is 52 and printing descending tops, signalling waning momentum.

Therefore, traders are recommended to sell the rally, then buy the dip.

Sudden Bearish Shock! GBPUSD Set to Reverse?_1

Sudden Bearish Shock! GBPUSD Set to Reverse?_2

Trade Recommendations

Trade Direction: Sell

Entry Price: 1.338

Target Price: 1.29

Stop Loss: 1.35

Support: 1.3/1.29/1.28

Resistance Levels: 1.34/1.342/1.35

Risk Warnings and Disclaimers

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Alan

Forex

Summary:

The UK's November CPI has declined to 3.2%, significantly increasing market expectations for the Bank of England to implement interest rate cuts, potentially exerting downward pressure on the British pound.

SELL GBPUSD

EXP

TRADING

1.33308

Entry Price

1.30200

1.34600

1.34193 +0.00464 +0.35%

0.0

Pips

Flat

1.30200

Exit Price

1.33308

Entry Price

1.34600

Fundamentals

Today, the UK's November Consumer Price Index (CPI) unexpectedly declined, with the annual inflation rate dropping from 3.6% in October to 3.2%, and the month-on-month rate showing a contraction (-0.2%). Core inflation also decreased to 3.2%. This data significantly underperformed market expectations, exerting immediate downward pressure on the British pound and renewing market speculation of a more accommodative stance by the Bank of England.

It is noteworthy that the CPI reduction reflects a genuine, rather than nominal, decline (monthly negative growth), indicating a sustained easing of inflation. This bolsters market expectations of monetary policy loosening by the Bank of England, resulting in short-term pound depreciation following the data release.

The unexpectedly softening November CPI data directly undermines the Bank of England's rationale for maintaining high interest rates, prompting market expectations for an earlier or faster rate cut should inflation continue to decline. Concurrently, signals of weakening UK employment and wage growth—evidenced by rising unemployment and slowing wage inflation—present policymakers with a dilemma between supporting economic growth and preventing inflationary resurgence. Investors promptly adjusted their interest rate spreads and asset allocations, leading to a notable GBPUSD depreciation. The market's swift response is also reflected in GBP cross-currency basis swaps and interest rate swap markets, where traders have begun to incorporate a higher probability of monetary policy easing by the Bank of England.

Technical Analysis

Inflation Continues to Decline, Making a Bank of England Rate Cut Highly Likely_1

In the 1D timeframe, the GBPUSD has recently reattempted to rally but remains below the 144-day SMA, which it has failed to definitively break through despite multiple attempts. The failed break indicates weakening bullish momentum, suggesting a potential short-term downtrend in price action.

Currently, following a dip from short-term highs triggered by economic data releases, the GBPUSD appears poised to test the 1.3200 support level. A breach of this support could further propel the exchange rate towards the 1.3000 threshold.

Trading Recommendations

Trading Direction: Sell

Entry Price: 1.3340

Target Price: 1.3020

Stop Loss: 1.3460

Valid Until: December 31, 2025 23:00:00

Support: 1.3000, 1.2700

Resistance: 1.3405, 1.3455

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

If the price reacts positively to this support once more, we could witness an upward impulse toward the immediate resistance at 156.16.

BUY USDJPY

Close Time

CLOSED

154.938

Entry Price

156.160

154.000

157.466 -0.234 -0.15%

50.2

Pips

Profit

154.000

155.440

Exit Price

154.938

Entry Price

156.160

Market participants are currently fixated on the Bank of Japan (BoJ) policy decision scheduled for this Friday. The central bank is widely anticipated to hike its policy rate to 0.75%, a move that would establish the highest interest rate level in over three decades. Given that this hawkish shift is largely priced in, investors will likely pivot their attention toward Governor Kazuo Ueda’s forward guidance, seeking clues regarding the timing and trajectory of subsequent hikes. Ahead of the decision, Japan’s economic calendar features crucial November trade data on Wednesday, including adjusted merchandise trade balances, exports, and imports.

Simultaneously, the US economic landscape remains complex. Recent data from the U.S. Bureau of Labor Statistics (BLS) offered a conflicting narrative: while November’s workforce expansion exceeded forecasts, the unemployment rate simultaneously climbed to its highest peak since 2021. Despite this labor market softening, which theoretically supports aggressive easing, expectations for a January 2026 rate cut remain notably low at approximately 25%, according to Capital Edge data.

Further complicating the outlook, delayed retail sales figures from the U.S. Census Bureau suggest that American consumer spending remains resilient, with October sales figures holding steady. However, the underlying data reveals a growing burden on households due to rising costs for food, furniture, and imported goods—inflationary pressures exacerbated by current tariff policies.

Atlanta Fed President Raphael Bostic characterized the latest jobs report as a "mixed bag," stating it has not fundamentally altered his perspective. He expressed a preference for holding rates steady during the Fed's most recent deliberations, citing "multiple surveys" that indicate rising input costs for businesses. Bostic noted that firms are determined to protect their profit margins by passing these costs on to consumers through higher prices. He cautioned that the Fed should not prematurely declare victory over inflation, even as he projects 2026 GDP growth at roughly 2.5%.

This cautious tone mirrors the Federal Reserve’s broader strategic shift. Last Wednesday’s 25 basis point (bps) cut came despite inflation lingering near 3%. Chair Jerome Powell emphasized a "wait-and-see" approach, signaling an impending pause in the easing cycle. Having already implemented 175 bps of total cuts, Powell maintains that policy has returned to a neutral range and is no longer "strongly restrictive." Technical Rebound From Support Targeted Before Major BoJ Move_1

Technical Rebound From Support Targeted Before Major BoJ Move_1

Technical Analysis

The USD/JPY pair has established solid support at the 154.49 level, a zone previously tested in early December. In that prior instance, the pair initiated a bullish rally that peaked at the December high of 156.94. If the price reacts positively to this support once more, we could witness an upward impulse toward the immediate resistance at 156.16.

From a moving average perspective, the 100 and 200-period MAs on the 4-hour chart are currently situated at 155.58 and 155.74, respectively. Their close proximity creates a significant technical cluster near the upside target. A decisive close above these averages would likely accelerate the bullish momentum toward the resistance zone. Notably, this area also aligns with the 0.618 Fibonacci Retracement level of the recent move. Consequently, any upward surge toward this confluence of indicators should be viewed as a technical retracement, potentially offering a strategic entry point for sellers before the pair resumes its broader bearish trend.

Trading Recommendations

Trading direction: Buy

Entry price: 154.92

Target price: 156.16

Stop loss: 154.00

Validity: Dec 26, 2025 15:00:00

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

This level saw the price rejected by the 200-period Moving Average (MA), leading to a decline toward the 1.3009 local low on November 4th.

SELL GBPUSD

EXP

PENDING

1.34500

Entry Price

1.32950

1.35200

1.34193 +0.00464 +0.35%

Pips

PENDING

1.32950

Exit Price

1.34500

Entry Price

1.35200

The latest data from the U.S. Bureau of Labor Statistics (BLS) presented a conflicting narrative: while the economy expanded its workforce beyond expectations in November, the unemployment rate simultaneously climbed to its highest level since 2021. Although the softening labor market provides a fundamental argument for further policy easing, market expectations for a rate cut in January 2026 remain subdued, hovering around 25% according to Capital Edge data.

Complementing this picture, delayed retail sales figures from the U.S. Census Bureau indicate that consumer spending remains relatively resilient, with sales figures holding steady through October. However, the report highlights that consumers are increasingly burdened by rising prices for essential goods, furniture, and various imported items—inflationary pressures largely attributed to the imposition of new tariffs.

Atlanta Fed President Raphael Bostic characterized the employment report as a "mixed bag" that does not fundamentally shift his outlook. He signaled a preference for holding rates steady during the Fed's most recent deliberations, noting that "multiple surveys" indicate rising input costs. According to Bostic, businesses are aggressively defending their profit margins by passing these costs on to consumers via higher prices. He warned that "price pressures are not stemming solely from tariffs" and cautioned that the Fed should not prematurely declare victory over inflation, even as he projects 2026 GDP to settle around 2.5%.

This cautious stance aligns with the Federal Reserve’s broader pivot. Last Wednesday, the Fed implemented a 25 basis point (bps) rate cut despite inflation lingering near 3%. The accompanying forward guidance was perhaps more impactful than the cut itself, as the central bank signaled an impending pause in the easing cycle. Chair Jerome Powell described this shift as a "wait-and-see" approach, suggesting that current rates sit at the upper bound of a neutral range. Having delivered 175 bps of total cuts, Powell asserted that policy is no longer "strongly restrictive."

Across the Atlantic, S&P Global data released on Tuesday showed surprising strength in the UK economy. The Composite PMI reached 52.1, outperforming both the previous 51.2 reading and market estimates. Specifically, the Services and Manufacturing PMIs climbed to 52.1 and 51.2, respectively, with both figures comfortably beating consensus. Despite this growth, the upside potential for the British Pound (Cable) may be capped by expectations of a Bank of England (BoE) move. Markets widely anticipate that the BoE will reduce its key interest rate by 25 bps to 3.75% during its December meeting. Local Resistance and BoE Cut Expectations Signal Possible Pullback_1

Local Resistance and BoE Cut Expectations Signal Possible Pullback_1

Technical Analysis

GBP/USD has encountered significant selling pressure at the 1.3455 level, a zone not tested since October 16th. Recently, this level saw the price rejected by the 200-period Moving Average (MA), leading to a decline toward the 1.3009 local low on November 4th. Following that bottom, the pair embarked on a sustained bullish rally, recently pushing the Relative Strength Index (RSI) into overbought territory. A failure to decisively break above this current resistance could trigger a bearish correction toward the 1.3293 support zone—a logical short-term target where price has previously found stability.

On the 4-hour chart, the 100 and 200-period Moving Averages are positioned at 1.3294 and 1.3207, respectively. The 100-period MA aligns almost perfectly with the immediate support area, significantly increasing the probability of a corrective move to this level. Furthermore, this zone coincides with the 0.50 and 0.618 Fibonacci Retracement levels of the most recent bullish leg. This confluence of technical indicators—overbought RSI, historical resistance, and Fibonacci support—favors a healthy pullback before any further upward movement.

Trading Recommendations

Trading direction: Sell

Entry price: 1.3450

Target price: 1.3295

Stop loss: 1.3520

Validity: Dec 26, 2025 15:00:00

Risk Warnings and Disclaimers

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Eva Chen

Forex

Summary:

The Bank of Japan signaled that obstacles to raising interest rates have been removed, with wage growth momentum remaining intact. The Tankan Survey has strengthened the Bank of Japan's rationale for raising rates.

BUY USDJPY

EXP

PENDING

151.500

Entry Price

161.070

148.600

157.466 -0.234 -0.15%

Pips

PENDING

148.600

Exit Price

151.500

Entry Price

161.070

Fundamentals

During Tuesday's European session, the yen maintained its strength while the dollar weakened, keeping USDJPY persistently below the psychologically significant 155.00 level. Market expectations that the Bank of Japan will raise interest rates this week have been a key factor driving the safe-haven currency's strong performance.

The Bank of Japan stated that further progress has been made on wages, a key factor that effectively solidified the rationale for this week's rate hike. A report indicated that wage growth momentum remains robust despite U.S. tariff hikes. A report released by the Bank of Japan on Monday stated: “Most reports from the head office and branches indicated that companies expect wage growth in fiscal year 2026 to be roughly the same as in fiscal year 2025, which saw rapid wage growth.”

Earlier this month, Bank of Japan Governor Kazuo Ueda stated that the central bank would “actively” gather wage growth data to make an appropriate decision on interest rate hikes at its meeting ending on Friday.

Additionally, the quarterly Tankan Survey released earlier showed that confidence among large Japanese manufacturers improved for the third consecutive quarter, reaching its highest level in four years. Confidence among non-manufacturing firms also remained near its highest level since the early 1990s. Japan's fourth-quarter Tankan Survey signaled broadly positive economic conditions, reinforcing market expectations that the Bank of Japan will continue advancing interest rate normalization.

However, the market has largely priced in this expectation. The direction of the USDJPY will once again hinge on the tone of Governor Kazuo Ueda. I anticipate he will express cautious optimism regarding further rate hikes. This should provide support for the yen.

Tankan Survey Data Reinforces Case for Rate Hike; Yen Consolidates in Weak Territory Awaits Central Bank Guidance_1

Technical Analysis

The USDJPY is showing neutral intraday movement, with the downward correction from 157.88 continuing. On the downside, a break below 154.33 could lead to a test of the 55-day SMA (currently at 153.66), with potential for further declines.

On the upside, a break above 156.94 would trigger a retest of 157.88. A decisive breach of this resistance level could reignite the entire upward trend originating from the key structural resistance zone spanning 139.87 to 158.85. It is recommended to set the foundation.

Trading Recommendations

Trading Direction: Buy

Entry Price: 151.50

Target Price: 161.07

Stop Loss: 148.60

Valid Until: January 1, 2026 23:55:00

Support: 154.38, 153.64, 152.85

Resistance: 156.20, 156.96, 157.88

Risk Warnings and Disclaimers

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Warren Takunda

Traders' Opinions

Summary:

GBP/USD surged more than 0.4% on Tuesday, boosted by soft US labor market data and stagnant retail sales, reinforcing expectations for potential monetary easing from both the Federal Reserve and Bank of England.

BUY GBPUSD

Close Time

CLOSED

1.34203

Entry Price

1.35000

1.33450

1.34193 +0.00464 +0.35%

75.3

Pips

Loss

1.33450

1.33445

Exit Price

1.34203

Entry Price

1.35000

The British pound extended gains against the US dollar on Tuesday, with GBP/USD trading at 1.3432 after briefly touching a low of 1.3355 earlier in the session. The rally was fueled by disappointing US economic data, which underscored lingering weakness in the labor market and raised expectations for a more dovish Federal Reserve stance in the coming months.

November Nonfarm Payrolls in the United States increased by 64,000 jobs, slightly above the forecast of 50,000 and a marked improvement from October’s decline of 105,000. Despite the modest payroll gains, the unemployment rate rose to 4.6% from 4.4%, surpassing the Federal Reserve’s 4.5% estimate. The data highlighted that while job creation is stabilizing, the labor market remains soft, which could justify a pause or even a potential rate cut in the Fed’s policy path, according to market watchers.

Retail Sales data added nuance to the US economic picture. Headline Retail Sales in October were unchanged at 0%, below expectations for a 0.1% increase and following September’s marginal 0.1% gain. Yet, the control group used in GDP calculations showed a sharp rebound of 0.8% after a -0.1% contraction in the previous month, suggesting that consumer spending, a key driver of the economy, retains underlying strength despite headline weakness.

The reaction in currency markets was immediate. GBP/USD climbed toward the daily high as traders digested the data, while the US Dollar Index, which tracks the dollar against a basket of six major currencies, fell 0.35% to 97.91, reflecting the greenback’s vulnerability amid mixed economic signals. Analysts noted that the combination of soft payrolls and flat retail sales reduced pressure on the Fed to tighten further, creating a supportive environment for risk-sensitive currencies such as the pound.

In the United Kingdom, the labor market remains relatively resilient but not without stress. The UK unemployment rate rose to its highest level since early 2021, yet S&P Global Purchasing Managers Indices (PMIs) indicated that business activity remains robust, suggesting that the UK economy is managing to maintain momentum despite elevated uncertainty. These developments have reinforced expectations for a potential Bank of England rate cut at Thursday’s policy meeting. Capital Edge data shows a 92% probability of a reduction, with traders pricing in roughly 60 basis points of easing through 2026. A Reuters poll indicated that the majority of economists anticipate the Bank Rate to fall from 4% to 3.75%.

Technical Analysis

From a technical standpoint, GBP/USD remains in a well-established uptrend, following a rising trendline that has provided consistent support since late November. The pair recently entered a corrective phase in the form of a descending consolidation or falling wedge, yet this pullback has been shallow and supported by both the trendline and dynamic moving averages. This suggests the consolidation is healthy rather than indicative of a reversal. Price compression between the descending resistance of the wedge and the ascending support trendline points to a potential breakout scenario. A confirmed move above the descending trendline would likely resume the broader bullish trend, opening the way toward the October 17 high at 1.3471 and potentially higher targets around 1.3500.