The Bank of Canada maintained its policy interest rate at 2.25% last week, indicating that the current monetary policy environment remains "broadly appropriate" due to inflation approaching target levels and resilient economic activity. Market participants may focus on upcoming Canadian retail sales data releases. Prime Minister Mark Carney stated that the likelihood of Canada reaching a trade agreement with the U.S. on key issue areas is low, with related matters expected to be addressed during the review of the USMCA trade agreement next year. Previously, both parties had approached an agreement on resolving tariffs imposed by the U.S. on steel, aluminum, and automobiles, but negotiations were halted in October after U.S. President Trump suspended discussions in response to Ontario government anti-tariff advertising. Carney noted that these issues are to be integrated into the broader USMCA negotiations, and given the upcoming review deadlines, the probability of reaching sector-specific agreements in the short term is extremely low.

Data from the U.S. Bureau of Labor Statistics released on Thursday indicated a modest decline in the November Consumer Price Index (CPI) to 2.7%, below the market consensus of 3.1%. Simultaneously, the core CPI, excluding volatile food and energy prices, rose by 2.6%, also below expectations of 3.0%, marking the slowest growth rate since 2021. U.S. President Donald Trump stated on Thursday that the next Federal Reserve Chair will be a proponent of substantial interest rate reductions. He also indicated that he will soon announce his successor to Jerome Powell. Financial markets responded positively in the short term to the inflation data, with equities rising, Treasury yields falling, and the dollar weakening. However, the Federal Reserve remains cautious. Despite the benchmark interest rate being lowered by 25 basis points to a target range of 3.50%–3.75%, Chair Powell emphasized that further rate cuts are unlikely until inflation and employment signals become clearer, noting tariffs as a significant factor sustaining inflation above the target. The overall labor market remains relatively stable. Initial jobless claims for the week of mid-December decreased, suggesting that previous volatility was largely holiday-related. While large-scale layoffs have not occurred, hiring has visibly slowed, and some unemployed individuals are experiencing extended unemployment durations. Surveys indicate that tariff-induced uncertainty continues to be a primary concern for businesses, directly impacting hiring plans and investment decisions.

In the 1D timeframe, the price has broken below the EMA200 and is operating along the lower Bollinger Band. However, a bullish engulfing pattern has emerged, indicating a potential short-term rebound despite the prevailing bearish channel. Following a MACD death cross, both the MACD line and signal line have fallen below the zero-axis, signifying a transition into a bearish trend. The RSI at 35 suggests the market is in an oversold condition, implying that although the decline is not yet fully exhausted, a corrective bounce could occur at any moment. In the 4H timeframe, Bollinger Bands are converging with narrowing width, and SMAs are converging, indicating diminishing downward momentum. After a MACD bullish crossover, the fast and slow lines have retracted near the zero level, hinting at an imminent trend reversal. Resistance levels are identified around the EMA50 and EMA200 at approximately 1.38 and 1.391, respectively. The RSI at 53 reflects a neutral market sentiment, with traders adopting a wait-and-see attitude. Therefore, it is recommended to go long before going short.

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