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Daily Pivots: (S1) 1.3723; (P) 1.3748; (R1) 1.3775; More...

Intraday bias in USD/CAD is turned neutral first with 4H MACD crossed above signal line. On the downside, below 1.3720 will affirm the case that corrective rebound from 1.3538 has completed at 1.3878. Deeper fall should then be seen to retest 1.3538 low. On the upside, however, above 1.3809 will dampen this view, and turn bias back to the upside for retesting 1.3878 instead.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. Next target is 61.8% retracement of 1.2005 (2021 low) to 1.4791 at 1.3069.

Canadian Dollar edged lower in early US trading Friday following a mixed labor market report that offered little clarity on the BoC’s next move. The set of data suggests that slack is building, but not yet enough to trigger a policy response.

BoC left its benchmark rate unchanged at 2.75% last week for the third straight meeting, stating that a cut could be warranted if economic weakness deepens and inflationary pressures from global trade disruptions remain contained. Today’s report will add weight to those arguments, but with no surge in unemployment and wage pressures still evident, the central bank is expected to stay cautious.

Markets may start pricing in a higher probability of a rate cut in Q4, but an immediate policy shift remains unlikely. Loonie traders appear to be taking the data in stride, with USD/CAD holding within tight range, reflecting a wait-and-see stance.

Broader market moves were subdued heading into the weekend. Yen came under fresh pressure and is now the second worst performer on the week, trailing only Swiss Franc. Dollar is slightly firmer today but remains the third weakest major, still digesting recent dovish shifts in Fed expectations.

On the stronger side, Sterling continues to outperform, buoyed by the Bank of England’s hawkish rate cut this week. Aussie and Kiwi also remain firm. Euro and Loonie are trading in the middle of the pack, showing no strong directional bias.

Meanwhile, tensions between India and the US are escalating. In a rare public signal of protest, New Delhi has reportedly frozen plans to purchase US weapons and aircraft following US President Donald Trump’s decision to hike tariffs on Indian exports to 50%. A planned visit by Indian Defence Minister Rajnath Singh to Washington has also been scrapped according to media reports.

Canada’s jobs shrink -40.8k in July, wages growth pick up

Canada’s labor market surprised to the downside in July, shedding -40.8k jobs versus expectations of a 15.3k gain. The drop was led by a sharp decline in full-time employment (-51k), and offsetting some of June’s strong 83k rise. Overall job growth has stagnated, with employment up just 27k since January. However, the unemployment rate held steady at 6.9%, slightly better than the expected 7.0%.

Despite the headline job loss, average hourly wages rose 3.3% yoy in July, slightly up from June’s 3.2% yoy. Total hours worked dipped marginally by -0.2% mom, indicating flat momentum in overall labor output. The mixed signals—a steep fall in full-time jobs alongside rising wages—paint a complex picture for policymakers.

BoE's Pill questions cut pace, says inflation risks may delay easing

BoE Chief Economist Huw Pill signaled that the central bank may need to reconsider its steady pace of easing if shifts in longer-term inflation dynamics persist. In a briefing to business leaders, Pill acknowledged that inflation pressures are likely to keep easing, but warned that price- and wage-setting behavior" may delay further policy easing.

“That might lead us to... question whether the pace at which we're reducing Bank Rate... is sustainable,” he said, referencing the quarterly 25bps cut rhythm the BoE has maintained over the past year.

Pill's comments help clarify the reasoning behind Thursday’s unexpectedly tight 5–4 policy vote, where he and three other members dissented against the 25bps cut to 4.00%. The majority, including Governor Andrew Bailey, favored continuing the easing path. But the split exposed growing concern within the Monetary Policy Committee over stickier inflation risks. Pill said the more hawkish voters are focused on upside risks driven by behavioral shifts rather than headline inflation itself.

Traders are now pushing back expectations for the next cut, with futures no longer fully pricing a 25bps move before February. Pill's remarks reinforce the message that while policy is still on a downward path, the pace may slow if inflation proves more persistent beneath the surface.

BoJ Opinions: 2–3 months needed to Gauge Tariff impacts, year-end hike possible

BoJ’s July 30–31 Summary of Opinions revealed a broadly cautious stance on future policy moves, with members emphasizing the need for more data before shifting course.

Despite the recent US–Japan tariff agreement, board members reaffirmed that Japan’s baseline outlook has not improved. "Japan's economic growth will moderate and the improvement in underlying CPI inflation will be sluggish temporarily,” one policymaker said. Accordingly, the consensus was to maintain current interest rates and financial accommodation, while monitoring trade risks and external demand.

“At least two to three more months are needed to assess the impact of US tariff policy,” one member stated, noting that the direction of US monetary policy and exchange rates could also shift materially depending on inflation and labor conditions.

Still, the door is now open for rate hikes later this year. The Summary suggests that if incoming data shows resilience in the US economy—and Japan avoids major trade fallout—the BoJ could resume policy normalization as soon as year-end.

“It may be possible for the Bank to exit from its current wait-and-see stance, perhaps as early as the end of this year,” one policymaker said. That prospect keeps the door open to further hikes in late 2025 if inflation and growth align.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.3723; (P) 1.3748; (R1) 1.3775; More...

Intraday bias in USD/CAD is turned neutral first with 4H MACD crossed above signal line. On the downside, below 1.3720 will affirm the case that corrective rebound from 1.3538 has completed at 1.3878. Deeper fall should then be seen to retest 1.3538 low. On the upside, however, above 1.3809 will dampen this view, and turn bias back to the upside for retesting 1.3878 instead.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. Next target is 61.8% retracement of 1.2005 (2021 low) to 1.4791 at 1.3069.

Canada’s labor market surprised to the downside in July, shedding -40.8k jobs versus expectations of a 15.3k gain. The drop was led by a sharp decline in full-time employment (-51k), and offsetting some of June’s strong 83k rise. Overall job growth has stagnated, with employment up just 27k since January. However, the unemployment rate held steady at 6.9%, slightly better than the expected 7.0%.

Despite the headline job loss, average hourly wages rose 3.3% yoy in July, slightly up from June’s 3.2% yoy. Total hours worked dipped marginally by -0.2% mom, indicating flat momentum in overall labor output. The mixed signals—a steep fall in full-time jobs alongside rising wages—paint a complex picture for policymakers.

Full Canada's employment release here.

BoE Chief Economist Huw Pill signaled that the central bank may need to reconsider its steady pace of easing if shifts in longer-term inflation dynamics persist. In a briefing to business leaders, Pill acknowledged that inflation pressures are likely to keep easing, but warned that price- and wage-setting behavior" may delay further policy easing.

“That might lead us to... question whether the pace at which we're reducing Bank Rate... is sustainable,” he said, referencing the quarterly 25bps cut rhythm the BoE has maintained over the past year.

Pill's comments help clarify the reasoning behind Thursday’s unexpectedly tight 5–4 policy vote, where he and three other members dissented against the 25bps cut to 4.00%. The majority, including Governor Andrew Bailey, favored continuing the easing path. But the split exposed growing concern within the Monetary Policy Committee over stickier inflation risks. Pill said the more hawkish voters are focused on upside risks driven by behavioral shifts rather than headline inflation itself.

Traders are now pushing back expectations for the next cut, with futures no longer fully pricing a 25bps move before February. Pill's remarks reinforce the message that while policy is still on a downward path, the pace may slow if inflation proves more persistent beneath the surface.

• USDCAD lacks momentum but maintains hopes for a positive reversal.
• Market action tests a make-or-break point near 1.3720.

USD/CAD has traded quietly this week, slipping from 1.3800 to 1.3720 despite steep US import tariffs of 10–40% kicking in against countries without trade deals. Canadian employment data due today could still inject volatility before the weekend, with the unemployment rate expected to rise to 7.0% for the first time in four years.

Although bullish momentum has been lacking lately, the pair appears to have laid the groundwork for a potential positive trend reversal. Having confirmed a bullish triple-bottom pattern, the price posted a new higher high near 1.3877 before upside pressures were capped by the 23.6% Fibonacci retracement level of the 2025 downtrend near 1.3835. The bullish crossover between the 20- and 50-day SMAs is adding to the constructive signals, with the price now seeking fresh buying interest near the protective 20-day SMA and the constraining trendline from July 2023 at 1.3720.

The stochastic oscillator suggests that the latest decline is overdone and that a pivot higher could be imminent. However, the downward slope in both the RSI and MACD indicates that momentum could stay weak.

If the pair manages to break above the 1.3835 barrier, the next hurdle could appear within the April–May range of 1.3930–1.3970. Slightly higher, the 200-day SMA and the 38.2% Fibonacci level at 1.4017 could challenge any attempt at a full bullish trend reversal above May’s high.

On the downside, a close below the 50-day SMA at 1.3685 could trigger another critical test near the 1.3600 level and the triple-bottom area of 1.3565. If this floor gives way, the tentative support trendline from July 2023 at 1.3480 could prevent a deeper fall towards the January 2024 base near 1.3355.

In summary, USD/CAD bulls have not yet surrendered to the bears. The 1.3720 zone could still serve as a springboard for a renewed positive trajectory.

The geopolitical risk premium in the oil market has faded, taking a back seat after a four-week, 30% parabolic rally in West Texas Oil CFD (a proxy for WTI crude futures) during the initial phase of the Israel-Iran conflict.

Key takeaways

• Oil’s geopolitical risk premium has subsided after a 30% rally during the Israel-Iran conflict, with West Texas Oil CFD plunging 18% from its 23 June 2025 high.
• US crude oil inventory drawdowns have slowed, signalling potential stock build-ups that could further weigh on WTI prices.
• Possible easing of US sanctions on Russian oil, combined with OPEC+’s planned output hike, may add downward pressure on crude prices.
• West Texas Oil CFD has broken below key moving averages and trend supports, signalling the end of its three-month rebound and pointing to a medium-term bearish phase unless it breaks above US$68.80.

US crude oil inventories are building up again

Fig. 1: EIA US crude oil inventories excluding SPR (y/y change) with WTI crude oil futures as of 1 Aug 2025 (Source: MacroMicro)

The growth of US crude oil inventories excluding the Strategic Petroleum Reserve (SPR) on a year-on-year basis has an indirect correlation with the movement of WTI crude oil, as a build-up in oil inventories puts downside pressure on oil prices.

Since 20 June 2025, the drawn down of US crude oil inventories (excluding SPR) has slowed down from -9.9% y/y to -1.3% y/y as of 1 August 2025 based on data from the US Energy Information Administration (EIA) which suggests a potential build-up in oil inventories which is likely to put further downside pressure on the prices of WTI crude oil (see Fig. 1).

A possible reduction of US sanctions on Russian oil

Recent media reports have highlighted that the Russian government confirmed that Presidents Putin and Trump will meet for summit talks on ending the war in Ukraine in the next few days.

Hence, a ceasefire deal between Russia and Ukraine is likely to allow the removal or reduction of sanctions on Russia’s oil exports, in turn, increasing oil supply on top of ongoing OPEC+ production hikes where the cartel has agreed to pump an extra 2.5 million barrels of oil per day starting in September.

The net effect is a more dampening effect on the prices of WTI crude oil.

The three-month corrective rebound in WTI crude oil may have ended

Fig. 2: West Texas Oil CFD medium-term trend as of 8 Aug 2025 (Source: TradingView, click to enlarge chart)

The West Texas Oil CFD has broken below its 20-day, 50-day, and 200-day moving averages. In addition, its daily MACD trend indicator has broken below a former parallel ascending support from 6 May 2025 and continued to trend downwards below its centreline.

These observations suggest that a three-month corrective rebound from the 9 April 2025 low to the 23 June 2025 high is likely to have ended. The next possible movement of the West Texas Oil CFD is likely a medium-term (multi-week) impulsive bearish down move within a major downtrend phase in place since the 28 September 2023 high (see Fig. 2).

Bearish bias below US$67.25/68.80 key medium-term pivotal resistance for the next supports to come in at US$60.55, US$55.00, and US$50.50/49.10 (congestion area of 5 June/7 Aug 2017 & Fibonacci extension).

However, a clearance above US$68.80 invalidates the bearish scenario for a squeeze up to retest the next medium-term resistances at US$71.30 and US$74.00.

Gold quickly recovered and approached the upper limit of the medium-term consolidation range of $3,250-3,400 per ounce, thanks to the return of fears of stagflation in the US, the growing likelihood of a Fed rate cut in September, and frenzied demand in China. The employment sub-index in surveys of purchasing managers in the services sector has fallen for the fifth time in the last six months, while prices are rising rapidly.

Stagflation is good for gold, as low growth prevents the Fed from tightening while inflation is eroding the value of dollar assets. Precious metals are used as a hedge against inflationary risks.

After a long period, the outlook for gold has been looking more bullish. The dramatic reversal in expectations regarding the Fed’s interest rate cuts and accelerating inflation creates the ideal background for gold. The decline in demand from central banks and the jewellery industry is offset by a decrease in above-ground stocks outside exchanges due to arbitrage operations.

If the upper boundary is broken and a bullish rally begins in gold, there is potential for a slide down to $3950-4000, where the 161.8% extension levels from the rise from the lows at the end of last year to the resistance area from the end of April near $3420 are concentrated.

The EUR/USD pair edged higher on Friday, climbing to 1.1657, buoyed by expectations of a more dovish stance from the Federal Reserve and growing concerns over the economic impact of new US tariffs.

Recent data revealed that jobless claims exceeded forecasts this week, further signalling a softening labour market following last week’s lacklustre employment report.

On the political front, attention remains fixed on potential shifts within the Fed. US President Donald Trump has nominated Stephen Miran, head of the Council of Economic Advisers, to replace Adriana Kugler on the Fed’s Board of Governors. Meanwhile, reports suggest Christopher Waller is emerging as a leading candidate for Fed Chair. These developments have reinforced market expectations of an imminent rate cut as early as September.

Adding to the dollar’s woes, new US retaliatory tariffs, ranging from 10% to 41%, came into effect at midnight on Thursday. This has stoked fears of economic headwinds, further dampening sentiment towards the greenback.

Technical Analysis: EUR/USD

H4 Chart:

The EUR/USD saw a corrective move to 1.1698, followed by consolidation near the top of this correction. A break below 1.1611 could trigger a downward wave towards 1.1520, with potential for further declines to 1.1343. The MACD indicator supports this bearish scenario: its signal line remains above zero but has exited the histogram zone, suggesting a pullback towards lower levels.

H1 Chart:

The pair formed a downward impulse to 1.1611, followed by a rebound to 1.1679. The current consolidation phase appears set for a downward breakout, potentially initiating a fifth wave of decline towards 1.1520. A brief retest of 1.1611 (from below) may follow before another drop to 1.1444, with an eventual target of 1.1343. The Stochastic oscillator corroborates this view, with its signal line below 50 and trending sharply downward towards 20.

Conclusion

The EUR/USD remains under upward pressure amid speculation about the Fed and concerns over tariffs, but technical indicators suggest a near-term bearish correction is likely.

Earlier last week, the USD/JPY surged to a four-month high of 150.92 on 1 August, but its prior accumulated gains of the previous four sessions were all wiped out and formed a weekly bearish “Shooting Star” at the close of last Friday, 1 August US session.

These observations suggest a potential bullish breakout on the USD/JPY above the key 200-day moving average and the upper boundary of its medium-term ascending range configuration in place from the 22 April 2025 low as it reintegrated back below the 149.50 level.

Since the start of this week, 4 August, through today’s Asian session on 8 August, the Japanese yen has lagged behind other major currencies against the greenback. While the US Dollar Index has fallen 0.5%, the USD/JPY has posted a smaller decline of just 0.2%.

Let’s dissect the latest technical developments in the USD/JPY and construct a possible short-term trading set-up from a technical analysis perspective.

Fig. 1: USD/JPY minor trend as of 8 Aug 2025 (Source: TradingView)

Preferred trend bias (1-3 days)

A potential minor bearish breakdown looms on the USD/JPY within a medium-term ascending range configuration in place since the 22 April 2025 swing low of 139.89.

Bearish bias below 148.15 short-term pivotal resistance, and a break below 146.60 may expose the next supports at 145.85 (50-day moving average) in the first step before the medium-term support at 144.50 (lower boundary of the ascending range configuration from 22 April 2025 low).

Key elements

• From Friday, 1 August, to Tuesday, 5 August, USD/JPY experienced a 430-pip decline (high to low), with price action remaining below its 20-day moving average.
• The USD/JPY has formed a minor “Descending Triangle” bearish range continuation configuration with its downside trigger level at 146.60 below the 20-day moving average.
• The hourly RSI momentum indicator has been capped by a parallel descending resistance at the 56 level, which suggests the lack of upside momentum in USD/JPY.

Alternative trend bias (1 to 3 days)

A clearance above 148.15 invalidates the bearish scenario and sees a squeeze up towards the upper limit of the medium-term ascending range for the next intermediate resistances to come in at 148.75 and 149.50 (also the key 200-day moving average).

As the chart indicates, the Nikkei 225 stock index (Japan 225 on FXOpen) has today risen to the 42,000 mark, which is just below its all-time high.

Among the bullish drivers:

→ Corporate news. Strong quarterly results were reported by Sony Group and SoftBank.

→ Trade agreement developments. Positive news flow surrounds a potential tariff agreement between the United States and Japan, which could be finalised in the near term. According to Reuters, the Japanese government stated on Thursday that the US has pledged to adjust overlapping tariffs on Japanese goods to avoid double taxation.

Technical Analysis of the Nikkei 225 Chart

Previously, we highlighted the ascending channel that has shaped price action throughout 2025. This pattern remains valid, with the price now entering the upper half of the channel. The channel’s median line might act as a support level going forward.

The recent price behaviour attracts attention: a long bullish candle has formed on the chart – immediately following a breakout above the 41,280 resistance level (as indicated by the arrow). This signals a clear imbalance in favour of buyers.

From a bearish perspective:

→ The psychological resistance at 42,000 may hold – in late July, the price failed to stay above this level.

→ The RSI indicator has entered overbought territory.

→ Failure by the bulls to sustain a break above 42,000 could validate a potential Double Top bearish pattern.

From a bullish perspective:

→ The price might advance towards the upper boundary of the ascending channel.

→ The bullish candle displays characteristics of an FVG (Fair Value Gap) bullish pattern, which might serve as a future support level.

→ Further support could be provided by the orange trendline, as well as the former resistance at 41,280.

A bullish breakout attempt above 42,000 cannot be ruled out. However, will market optimism persist if the price approaches the upper limit of the channel?

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