The
Bank of Canada (BoC) held its policy rate steady at
2.25% on December 10, 2025, as widely expected. This marked the end of its easing cycle after several cuts earlier in the year. Governor Tiff Macklem emphasized a balanced risk outlook, with inflation near target but ongoing trade uncertainties (particularly U.S. tariffs and CUSMA review) weighing on growth. The hold was interpreted as slightly less dovish than some anticipated, given recent strong Canadian employment data.
Market Reaction: USDCAD initially spiked higher post-announcement (reaching ~1.3870) on reduced expectations for further BoC cuts relative to the Fed. However, buyers failed to sustain momentum, stalling at the
100-hour moving average. Sellers took control, pushing the pair lower through key retracement levels.
#### Key Technical Developments Post-BoC:
- The pair broke below the 50% Fibonacci retracement (~1.3839) of the move up from the mid-June 2025 low.
- Subsequent selling accelerated, testing and approaching the 61.8% Fibonacci retracement at 1.3768–1.3770, a critical support zone.
- As of December 14, 2025, spot prices are trading around 1.3769, near multi-week lows, reflecting sustained bearish pressure (CAD strength despite the rate hold).
#### Current Price Action and Levels to Watch:
- Bearish Bias Dominant: Repeated failures at the falling 100-hour MA (and minor resistance near 1.3820–1.3830) have kept sellers in control. The pair has rotated lower on corrective rebounds.
- Key Support:
- Immediate: 1.3768 (61.8% retracement and recent lows).
- Next: Swing lows around 1.3680–1.3700 (potential extension if breached).
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Key Resistance:
- Near-term: 1.3800–1.3823 (former support now resistance, plus 100-hour MA).
- Stronger: 1.3839–1.3870 (50% retracement and post-BoC highs).
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Broader Context: The downmove aligns with broader USD weakness (Fed signaling further easing) and resilient Canadian data reducing BoC cut odds. Oil prices and risk sentiment remain supportive factors for CAD.
#### Outlook:
- Bearish Continuation Likely if 1.3768 holds as new support but fails on retests—targeting lower toward 1.3700 or the mid-June base.
- Bullish Reversal Signal would require a clear break above 1.3830–1.3840 with volume, shifting bias back toward 1.3900+.
- Risks: Upcoming U.S. data (if strong) could support USD recovery; Canadian indicators or trade headlines could amplify CAD moves.
The break lower post-BoC hold highlights technical sellers dominating, with Fibonacci levels guiding the near-term path. Monitor for consolidation or extension early next week ahead of holiday-thinned liquidity.
