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27 August 2025,09:10

Daily Market Analysis

Canadian Dollar Under Pressure Amid Economic Uncertainty; GDP Data in Focus

27 August 2025, 09:10

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Key Takeaways:

* Inflation slowed to 1.7% in July from 1.9% in June, while unemployment remained at 6.9%, underscoring persistent labor market weakness.

*Softer fundamentals and trade-related pressures from U.S. tariffs continue to anchor expectations for a cautious policy stance in upcoming meetings.

*GDP growth is projected to stabilize around 1.8% in 2026, offering some support. Markets now eye Friday’s GDP release, where a stronger print could help the Loonie extend its modest recovery.

Market Summary:

The Canadian dollar remains under pressure amid persistent trade uncertainties and a cooling domestic economy through the first half of 2025. Recent data has underscored the slowdown: headline inflation eased to 1.7% in July, down from 1.9% the previous month, while the unemployment rate held at 6.9%, remaining elevated after climbing to 7.0% in May.

The softening macroeconomic landscape has solidified market expectations that the Bank of Canada will maintain an accommodative policy stance at its next meeting, further dampening sentiment toward the currency.

Despite ongoing headwinds—including U.S. tariffs implemented in April—Canada’s GDP is projected to stabilize around 1.8% growth in the coming year, reflecting underlying resilience in the broader economy. The Loonie has managed a modest rebound against certain G10 peers in recent sessions, with traders now looking ahead to Friday’s GDP release for further direction. A stronger-than-expected reading could reinforce confidence in Canada’s recovery narrative and lend further support to the currency.

Market participants will also be monitoring broader risk sentiment and commodity markets, particularly oil prices, for additional cues on the CAD’s near-term trajectory.

Technical Analysis 

EURCAD, H4

The EUR/CAD pair has retreated from a fresh high since 2018 at 1.6225, breaking below its established uptrend channel and signaling a potential near-term reversal. The pair had gained more than 2.5% from its August low before encountering resistance and undergoing a technical correction.

Key support is now anticipated near the 1.6050 level, a zone where buyers may emerge if selling pressure subsides. A successful defense of this level could prompt a short-term rebound, while a break below would likely accelerate the decline toward lower support thresholds.

Momentum indicators currently reinforce the bearish near-term bias. The Relative Strength Index (RSI) continues to trend lower, reflecting building downside momentum, while the Moving Average Convergence Divergence (MACD) has crossed below its zero line, confirming a shift in short-term direction.

Resistance level: 1.6155, 1.6264

Support level: 1.6050, 1.5933

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