Fundamental
Overview
The USD remains on the
backfoot as the support from the more hawkish repricing in interest rates
expectations got exhausted a couple of weeks ago. The market is now in line
with the Fed’s baseline projection of two cuts in 2025 and we will likely need
strong US data to price out the remaining rate cuts and give the greenback a
boost.
The data for now has been
good but not strong enough to make the market to price out the two cuts
expected by year-end. The next key data will be the prices paid component in
the ISM Services PMI tomorrow, the US Jobless Claims figures on Thursday, the NFP
report on Friday and the CPI next week.
On the CAD side, the underlying
inflation in Canada has been rising steadily since last December and more
recently we got much
higher than expected numbers with the Trimmed Mean rate back above 3%.
That triggered a more
hawkish repricing in interest rates expectations with the market now seeing
just one last rate cut in 2025. This week we have the BoC rate decision where
the central bank is widely expected to hold rates steady.
USDCAD
Technical Analysis – Daily Timeframe
USDCAD Daily
On the daily chart, we can see
that USDCAD is rejecting once again the major upward trendline
around the 1.37 handle. This is where the buyers continue to step in with a defined
risk below the trendline to position for a pullback into the downward
trendline. The sellers, on the other hand, will want to see the price breaking
lower to increase the bearish bets into the 1.35 handle next.
USDCAD Technical
Analysis – 4 hour Timeframe
USDCAD 4 hour
On the 4 hour chart, there’s
not much else we can glean from this timeframe but the first target for the
buyers should be the swing high at 1.3860. That would also be a nice spot for
the sellers to step in and position for the break below the major upward
trendline with a better risk to reward setup.
USDCAD Technical
Analysis – 1 hour Timeframe
USDCAD 1 hour
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 target a break below the major trendline.
The red lines define the average daily range for today.
Upcoming Catalysts
Today, we get the US Job Openings data. Tomorrow, we have
the BoC rate decision, the US ADP and the US ISM Services PMI. On Thursday, we
get the latest US Jobless Claims figures. On Friday, we conclude the week with
the Canadian Employment data and the US NFP report.
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