Fundamental
Overview
Last week, despite the
higher-than-expected inflation figures and a less dovish Powell, the US Dollar
couldn’t extend the gains. The market’s pricing remained largely unchanged at
three rate cuts by the end of 2025.
This might be a signal that
the market is now fine with the current pricing, and we will need stronger
reasons to price out the remaining rate cuts. This could open the door for some
pullbacks and general US Dollar weakness.
On the CAD side, we have
the Canadian CPI tomorrow. The market is pricing a 33% chance of another 50 bps
cut at the upcoming meeting. Higher than expected readings might increase the
chances of a 25 bps move and provide a relief rally.
Conversely, lower than
expected figures will likely increase the probabilities for a 50 bps cut and
weigh a bit on the CAD although it might not trigger too much weakness at this
point.
USDCAD
Technical Analysis – Daily Timeframe
USDCAD Daily
On the daily chart, we can
see that USDCAD eventually broke through the 2-year high and extended the rally
into the 1.41 handle. From a risk management perspective, the buyers will have
a better risk to reward setup around the previous resistance
now turned support at roughly 1.40 where we can also find a trendline
for confluence.
The sellers, on the other hand, will want to see the price breaking lower to
invalidate the breakout and position for a drop back into the 1.36 handle.
USDCAD Technical
Analysis – 4 hour Timeframe
USDCAD 4 hour
On the 4 hour chart, we can
see that we have another minor upward trendline defining the current bullish
momentum. If we were to get a pullback, we can expect the buyers to lean on the
trendline to position for a rally into new highs, while the sellers will look
for a break lower to target the major trendline.
USDCAD Technical
Analysis – 1 hour Timeframe
USDCAD 1 hour
On the 1 hour chart, we
have yet another upward trendline defining the bullish momentum on this
timeframe. The buyers will keep on leaning on it to target new highs, while the
sellers will look for a break lower to target the next trendlines. The red
lines define the average daily range for today.
Upcoming
Catalysts
This
week is pretty empty on the data front with the most important releases
scheduled for the latter part of the week. On Thursday, we get the latest US
Jobless Claims figures, while on Friday we conclude the week with the US Flash PMIs.
