Fundamental
Overview
The USD has finally got
some relief since last week after being battered for weeks. The focus is now on
the key data this week with the ISM Manufacturing PMI today and the NFP report
on Friday in the spotlight.
The market is waiting for
the key economic releases this week, and especially the NFP report, as that
will likely decide whether the Fed is going to deliver a standard 25 bps cut or
go for a more aggressive 50 bps cut in the upcoming meeting.
Right now, it looks like
the Fed is going to cut rates into a resilient economy, which has been a
positive driver for the risk sentiment, but if the data deteriorates further,
it could trigger recessionary fears.
Therefore, besides the
headline ISM number today, watch also the employment sub-index as a drop into
new lows could spook the markets while an improvement could lead to a positive
sentiment.
Tomorrow, we have also the
BoC Rate Decision where the central bank is expected to cut rates by 25 bps. The
recent CPI report showed some more easing in the
underlying inflation measures and the labour market data was pretty soft.
Overall, it doesn’t look
like the central bank will go for a 50 bps cut but it cannot be completely
ruled out. Including the September cut, the market expects a total of 75 bps of
easing by year end.
USDCAD
Technical Analysis – Daily Timeframe
USDCAD Daily
On the daily chart, we can
see that USDCAD bounced near the 1.34 handle after an incredible run to the
downside. From a risk to reward perspective, the sellers will have a better setup
around the 1.36 handle where they will find a strong resistance
where to lean onto to position for a drop into the 1.32 handle. The buyers, on
the other hand, will want to see the price breaking above the 1.36 resistance
to get back control and position for a rally into the 1.38 handle.
USDCAD Technical
Analysis – 4 hour Timeframe
USDCAD 4 hour
On the 4 hour chart, we can
see that we have minor upward trendline defining the current bullish momentum.
The buyers will likely keep on leaning on it to target the 1.36 resistance,
while the sellers will want to see the price breaking lower to increase the
bearish bets into the 1.34 handle.
USDCAD Technical
Analysis – 1 hour Timeframe
USDCAD 1 hour
On the 1 hour chart, we can
see the recent price action with some clean higher highs and higher lows on
this timeframe. For now, the buyers remain in control and the sellers will need
the price to break below the trendline to change the bias back to bearish. The
red lines define the average daily range for today.
Upcoming
Catalysts
Today we have the US ISM Manufacturing PMI. Tomorrow, we have the BoC Rate Decision
and the US Job Openings. On Thursday, we get the US Jobless Claims figures and
the ISM Services PMI. Finally, on Friday, we conclude the week with the Canadian
labour market report and the US NFP.
