We are pleased to bring you the latest edition of the series produced by our colleagues in RBC Capital Markets, hosted by George Davis, CMT, the award winning Chief Technical Analyst for Fixed Income and Currency Strategy.
In this installment George shares his key themes as we transition into 2025. First, the Canadian consumer is still highly leveraged and with approximately 400,000 mortgages due to reset in 2025, the consumer will be left with less disposable income. Next, uncertainty revolves around immigration with new government restrictions in place and if targets are met, population growth will be negative for the first time ever. The third issue revolves around the threat of tariffs and given the USMCA agreement is due to be renegotiated in 2026 this issue is expected to linger. These issues present downside risks to economic growth, which suggests a continuance of rate cuts by the Bank of Canada, creating downside risks for the Canadian dollar.
Heading into January, George sees a higher trading range for USDCAD, starting at 1.3850 on the downside to 1.4350 on the topside. This presents a positive environment for USD sellers as USDCAD moves toward the 1.4300 area. USD buyers should look for shorter-term corrections with pullbacks toward 1.4000 as the environment proves to be more challenging.