USDCAD Technical Analysis – BoC and FOMC in focus

Fundamental
Overview

The USD regained some
ground in the final part of last week and extended the gains this week, although
we haven’t got any meaningful catalyst for the move. Overall, we continue to
range as the market is waiting for something new for the next sustained trend.

Given that the “short US
dollar” is now the most crowded trade, such quick unwinding moves are natural,
and it will take something meaningful to lead the market to expect more rate
cuts than currently priced in and weaken the greenback further.

The Fed today is expected
to keep interest rates unchanged with Waller and likely Bowman voting for a 25
bps cut. Fed Chair Powell is expected to reiterate data dependency and will
likely open the door for a cut in September conditional on benign data.

On the CAD side, the underlying
inflation in Canada has been rising steadily since last December and continues
to hover near the upper bound of the 1-3% target range. The data out of Canada
has been improving recently and the latest employment report surprised to the upside.
The BoC today is expected to keep interest rates unchanged and there’s basically
a 50/50 chance that we won’t see any more rate cuts this year.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD has been trading inside a range between the 1.3550 support
and the 1.3800 resistance. We’ve been seeing such rangebound price action in
other markets as well because we haven’t got meaningful changes in the fundamentals
in the past couple of months. The market participants will likely continue to
play the range by buying at support and selling at resistance until we get a
breakout on either side.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, there’s
not much we can glean from this timeframe as the only key levels are the lower
and upper bounds of the range. Nevertheless, a break above the resistance
should see the buyers extending the rally into the next major swing level at
1.3860.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor upward trendline
defining the current bullish momentum. The buyers will likely continue to lean
on it to keep pushing into new highs, while the sellers will look for a break
lower to increase the bearish bets into the lower bound of the range. The red
lines define the average daily range for today.

Upcoming Catalysts

Today we have the US ADP, the US Q2 GDP,
the BoC rate decision and the FOMC policy announcement. Tomorrow we get the US
PCE price index, the US Jobless Claims, the US Employment Cost Index and the
Canadian GDP. Finally, on Friday, we conclude the week with the US NFP report
and the US ISM Manufacturing PMI.

investingLive.com (formerly ForexLive.com) is your new companion for the latest financial markets news and expert analysis

This article was written by Giuseppe Dellamotta at investinglive.com.