Fundamental
Overview
The USD weakened across the
board last week following another soft US CPI report and benign Jobless Claims figures. The market not only fully
priced in a rate cut in September but also started to price in some chances of
a back-to-back rate cut in November.
Overall, we had a
goldilocks data release with an economy that is slowing but still growing. This
should support the soft-landing narrative and be positive for the risk
sentiment.
The CAD, on the other hand,
keeps on being supported against the US Dollar mainly because of the risk-on
sentiment as the US data continues to support at least two rate cuts from the
Fed without sending recessionary signals.
On the monetary policy
front, the next big event will be the CPI report tomorrow. We saw another jump
in wage growth in the latest labour market report, so the BoC will likely need
good CPI figures to deliver a rate cut in July. The market is assigning a 75% probability
for a rate cut at the upcoming meeting.
USDCAD
Technical Analysis – Daily Timeframe
USDCAD Daily
On the daily chart, we can
see that USDCAD remains confined in a tight range right at the key 1.36 support zone. That’s where the buyers keep on stepping
in to position for a rally back into the 1.3785 resistance with a better risk
to reward setup. The sellers, on the other hand, will want to see the price
breaking lower to increase the bearish bets into the new lows with the 1.35
handle as the first target.
USDCAD Technical
Analysis – 4 hour Timeframe
USDCAD 4 hour
On the 4 hour chart, we can
see more clearly the tight range between 1.3600 and 1.3650 levels. There’s not
much to do here and the market participants will likely keep on “playing the
range” until we get a breakout.
USDCAD Technical
Analysis – 1 hour Timeframe
USDCAD 1 hour
On the 1 hour chart, we can
see that we got a slight breakout in the Asian session but that was faded
quickly in the European session. It’s now just a waiting game until we get a
breakout on either side. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have Fed Chair Powell speaking at the Economic Club of Washington,
D.C. Tomorrow, we get the Canadian CPI and the US Retail Sales report. On
Wednesday, we have Fed’s Waller speaking. On Thursday, we have the latest US Jobless
Claims figures, while on Friday we conclude with the Canadian Retail Sales
data.
