FUNDAMENTAL
OVERVIEW
USD:
The US dollar regained some
ground to start the week as the prolonged US-Iran stalemate has taken oil
prices back into triple digit levels.
That looks unlikely to
change anytime soon as Trump has rejected Iran’s proposal to first open the
Strait of Hormuz and then hold nuclear talks. Unfortunately, with US stock
prices at all-time highs Trump might not feel any pressure to concede.
This might even set the
stage for the next US dollar rally if the Strait of Hormuz remains closed for
much longer and oil prices stay elevated, thus forcing the Fed to hike interest
rates in the coming months.
Today, we have the FOMC
policy decision and although the Fed is expected to keep everything unchanged
amid the US-Iran uncertainty, there’s a risk of a more hawkish leaning due to
resilient US data and a longer than expected US-Iran war. A neutral Fed
shouldn’t bring much volatility, but a more hawkish one could give the
greenback a boost.
CAD:
On the CAD side, the currency
has erased all US-Iran war losses as the bullish US dollar bets
got unwound. Looking ahead, there are several risks for the CAD ranging from a
hawkish BoC amid sluggish economy and the CUSMA renegotiations.
Today, we have the BoC
policy decision where the central bank is widely expected to keep the policy
rate unchanged at 2.25%. The central bank will likely maintain a cautious
stance and a “wait and see” approach.
The BoC will also release
new economic forecasts which are expected to mirror the other central banks’
outlooks, with upward revision for inflation and downward revision for growth.
All in all, the decision is
unlikely to bring much volatility as the central bank will likely stress
data-dependency and avoid pre-committing to any rate path.
The market is pricing in a
rate hike in the fourth quarter of 2026, so traders will focus on any change in
tone and communication that could point to an earlier than expected rate hike
or a strong pushback against market’s pricing.
USDCAD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
USDCAD – daily
On the daily chart, we can
see that USDCAD is consolidating right
between the two major zones. If we get a pullback into the resistance zone
around the 1.3750 level, we can expect the sellers to step in with a defined
risk above it to position for a drop into the 1.3550 support. The buyers, on
the other hand, will look for a break to open the door for a rally into the
1.39 handle next.
USDCAD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
USDCAD – 4 hour
On the 4 hour chart, we have
a major downward trendline defining the bearish momentum. The sellers will
likely continue to lean on the trendline with a defined risk above it to keep
pushing into new lows. The buyers, on the other hand, will look for a break to
extend the pullback into the 1.3750 resistance zone.
USDCAD TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
USDCAD – 1 hour
On the 1 hour chart, we
have a minor upward trendline defining the current pullback. The buyers will
have a better risk to reward setup around the trendline to position for a rally
into the resistance, while the sellers will look for a break to increase the
bearish bets into the 1.3550 support next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the BoC and FOMC policy decisions. Tomorrow, we get the monthly
Canada’s GPD, US Q1 GDP, the US Employment Cost Index and the latest US Jobless
Claims figures. On Friday, we conclude the week with the US ISM Manufacturing
PMI.
