The Financial institution of Canada reduce rates of interest by 25 foundation factors from 2.75% to 2.50% of their September resolution whereas providing minimal ahead steerage on subsequent strikes.

Whereas the choice itself was no shock, the marginally extra downbeat tone of their accompanying assertion steered that additional easing may very well be attainable.

Let’s look at which setups from our watchlist capitalized on the BOC’s much less optimistic outlook and the way they carried out throughout this busy central financial institution week.

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The Setup

• What We Have been Watching: BOC Financial Coverage Assertion for September 2025
• The Expectation: BOC to chop charges by 0.25% to 2.50%
• Information consequence: BOC lowered borrowing prices by 25 foundation factors as anticipated, Governor Tiff Macklem emphasised that the general evaluation suggests this doubtless received’t be the ultimate reduce of the cycle
• Market setting surrounding the occasion: Warning forward of the extra market-moving FOMC resolution, with some profit-taking on brief USD positions and easing off threat performs

Occasion End result

The BOC delivered on expectations of an rate of interest reduce, refraining from giving sturdy ahead steerage however nonetheless conserving the door open for additional easing, probably in December. The official assertion highlighted dangers from a deteriorating labor market and tariffs uncertainty, with slowing momentum on worth pressures.

Key Takeaways:

• Price reduce delivered as anticipated: 25bp discount brings in a single day fee to 2.50%, with financial institution fee at 2.75% and deposit fee at 2.45%
• Labor market deterioration accelerating: Employment has declined for 2 consecutive months, pushing unemployment to 7.1% in August
• GDP contracted sharply: Second quarter GDP fell 1.6%, largely on account of tariff impacts on exports which plummeted 27%
• Inflation pressures moderating: Core inflation measures round 3% however month-to-month momentum has dissipated; headline CPI at 1.9%
• Commerce disruption spreading: Past preliminary tariffs on metal and aluminum, impacts now affecting auto, copper, softwood lumber, and agricultural sectors
• Enterprise funding paused: Firms delaying capital expenditure amid elevated coverage uncertainty

Through the press convention, Macklem famous that uncertainty stays elevated and that the central financial institution will proceed to evaluate impacts of tariffs and uncertainty on financial exercise and inflation.

Elementary Bias Triggered: Bearish CAD setups

The week’s buying and selling setting appeared complicated, as pre-FOMC positioning and threat flows remained dominant market drivers earlier than threat correlations appeared to interrupt down after the Fed occasion.

Early Week: Stimulus in Focus

Information that China and the U.S. reached a framework for a TikTok deal throughout weekend conferences lifted risk-taking early on, however the highlight was primarily on the upcoming FOMC resolution and the probability of a dovish announcement, with some bracing for a probably bigger 0.50% fee reduce.

Largely downbeat information from China additionally spurred extra stimulus hopes, with the federal government afterward confirming that they’ll have coverage measures to spice up companies sector exercise and overseas funding.

Mid-Week: Market Warning and FOMC Volatility

Market gamers began unwinding FOMC bets main as much as the precise occasion, resulting in a shallow greenback restoration in earlier buying and selling classes whereas gold additionally retreated from its document highs.

The highly-anticipated Fed announcement featured a 0.25% fee reduce as anticipated whereas the dot plot projections confirmed extra easing strikes for the rest of 2025. Nonetheless, the greenback rapidly rebounded from its decline when Fed head Powell downplayed labor market dangers whereas the up to date financial estimates confirmed upgrades in development and inflation.

Most asset lessons went off on their very own merry methods after the FOMC resolution, although, as particular person catalysts appeared to drive worth motion within the aftermath. Bitcoin discovered help from the SEC approval of generic itemizing requirements for crypto ETFs whereas U.S. fairness indices rallied on the heels of Nvidia’s funding in Intel. Crude oil turned its consideration again to geopolitical headlines, and Treasury yields banked on upbeat mid-tier U.S. information underscoring the Fed’s optimistic view.

Friday: 

Markets displayed uncommon correlations on Friday as a number of competing themes created investor confusion, with gold, Treasury yields, the greenback, and equities all advancing concurrently regardless of their typical inverse relationships. Combined Federal Reserve communications from officers Miran and Kashkari doubtless contributed to this divergence, as traders struggled to reconcile dovish coverage expectations with resilient financial indicators. The chance-off rotation was evident in declining speculative belongings like Bitcoin and crude oil, whereas conventional protected havens and U.S. belongings benefited from flight-to-quality flows amid world fiscal issues.

CAD/JPY: Internet Bearish CAD Occasion consequence + Danger-Off State of affairs = Arguably good odds of a web constructive consequence

CAD/JPY 1-hour Foreign exchange Chart by TradingView

This yen pair entered the BOC resolution already buying and selling beneath the short-term pattern line help whereas anti-USD flows got here in play forward of the FOMC announcement afterward the identical day. Expectations for a dovish BOC assertion additionally appeared to weigh on the Loonie earlier than the precise occasion, dragging it beneath the pivot level degree (106.67) midweek.

The precise announcement spurred one other dip for CAD/JPY however the transfer was muted largely on account of market nervousness forward of the FOMC resolution, which then led to a spike all the way down to S1 (106.00) whereas CAD trailed the U.S. greenback in its preliminary selloff. A bounce adopted throughout Powell’s not-so-dovish presser, bringing CAD/JPY again to retest the damaged pattern line.

CAD/JPY proceeded to rally by the remainder of the week, doubtless reflecting the slight shift in the direction of a broad threat on lean, and regardless of a tumble in oil costs. The “buy-the-rumor, sell-the-news” impact was additionally doubtless in play, given how bitter sentiment was on CAD main as much as the BOC Assertion.

The market ultimately discovered resistance on the R1 Pivot resistance space, the place we did see a bearish transfer correlating with the surprisingly hawkish BOJ assertion occasion (BOJ introduced it is going to unwind its huge ¥75 trillion ETF stockpile—mixed with two board members dissenting for fee hikes). This proved to be one other shopping for alternative for CAD/JPY bulls, doubtless with the assistance of the hawkish sentiment in JPY fading rapidly as merchants doubtless priced within the doubtless lengthy timeframe that the BOJ will unload its belongings.

Not Eligible to maneuver past Watchlist – Bullish CAD Setups and EUR/CAD Lengthy Setup

EUR/CAD: Internet Bearish CAD Occasion consequence + Danger-On State of affairs

EUR/CAD 1-hour Foreign exchange Chart by TradingView

This pair broke by the targed vary resistance not too lengthy after our dialogue, arguably with the assistance of web constructive mid-tier eurozone information such because the German ZEW financial sentiment index and upbeat ECB commentary doubtless lifted the euro.

A constructive displaying in European equities, doubtless pushed by threat flows in anticipation of a dovish FOMC, might have additionally stored the euro supported in opposition to the Loonie.

EUR/CAD even busted by R1 Pivot resistance degree and examined the R2 degree earlier than pulling again and holding a spread forward of the BOC’s assertion, and after the occasion in addition to merchants have been doubtless ready for FOMC to maneuver main changes.

The FOMC assertion triggered a spike previous R2 (1.6320), which quickly light as CAD additionally took benefit of greenback energy, and a “buy-the-rumor, sell-the-news” rally in CAD doubtless started to develop.

EUR/CAD made a powerful push decrease by the remainder of the week, regardless of the autumn in oil costs and the euro’s resilience to outperform this week, ultimately hitting the underside of the pre-BOC occasion vary we have been watching in our authentic dialogue.

CAD/CHF: Internet Bullish CAD Occasion End result + Danger-On State of affairs

CAD/CHF 1-hour Foreign exchange Chart by TradingView

Our watchlist dialogue talked about a attainable CAD/CHF upside breakout within the occasion that the BOC delivers a “hawkish reduce” or dampens expectations of additional easing. As beforehand mentioned, that didn’t play out, no less than as we initially assessed the occasion.

The pair really broke beneath the consolidation vary shortly after our authentic dialogue, strengthening the attractiveness of the setup if basic circumstances develop favorably.

In the end, this Watchlist was invalidated by the elemental consequence in our opinion, however CAD/CHF did rally strongly publish BOE-event because the “buy-the-rumor, sell-the-news” market response appeared to outweigh most different drivers of the week for the Canadian greenback. Broad risk-on sentiment was doubtless an element in addition to it seems the market wasn’t so down on the very fact the Fed didn’t sign a extra aggressive fee reduce outlook this week.

NZD/CAD: Internet Bullish CAD Occasion consequence + Danger-Off State of affairs 

NZD/CAD 1-hour Foreign exchange Chart by TradingView

As talked about above, bullish CAD watchlist setups just like the NZD/CAD brief at a spread prime  have been invalidated given the end result of the BOC financial coverage assertion, however that didn’t cease NZD/CAD bears from taking the pair sharply decrease.

For this explicit pair, whereas the “buy-the-rumor, sell-then-news” impact for CAD was most probably an enormous driver, NZD was no slouch in in driving this pair decrease.  The Kiwi had a horrible week, doubtless pushed by the regular stream of web weak New Zealand financial updates, most notably, the disappointing Q2 GDP learn that confirmed financial contraction in New Zealand.

In hindsight, this may increasingly have been the perfect pair to commerce because the Kiwi had contemporary fundamentals to drive momentum, an ideal match to how merchants finally reacted in CAD after the Financial institution of Canada assertion.

The Verdict

Whereas the BOC kept away from giving specific ahead steerage on additional easing, the tone of their official assertion highlighting labor market and tariffs dangers steered that the Canadian central financial institution is open to extra fee cuts for the remainder of the yr.

And with broader market sentiment leaning barely risk-off simply forward of the BOC announcement, CAD/JPY appeared essentially the most dependable setup for the week amongst our watchlist discussions. The pair already exhibited sustained bearish momentum even earlier than the goal occasion, conserving the chance for a retest in play ought to the BOC lean dovish.

Nonetheless, the “buy-the-rumor, sell-the-news” response in CAD was significantly sturdy, particularly with an absence of sturdy sign of future BOC cuts forward. Additionally in hindsight, the rebound most likely shouldn’t have been too large of a shock given the Canadian’s underneath efficiency in September, characterised by a powerful sell-off in CAD in opposition to the majors till mid-September, the place the foreign money held till the BOC occasion.

Submit-FOMC dynamics and an additional busy central financial institution week created a extra complicated internet of things driving the markets, however the fall in oil costs was most likely the habits that steered merchants have been merely unloading CAD brief, doubtless taking earnings from brief positions.

General, we fee this technique as “not going” as the one attainable web constructive consequence from shorting CAD/JPY this week would have been after the bounce and reversal patterns on the R1 Pivot resistance space. However that was short-lived and would have required very energetic commerce administration to generate a web constructive consequence.

Key Takeaways: