Fundamental Overview
The USD last week came under some more pressure as a series of soft US data pushed Treasury yields lower. The NFP report on Friday wasn’t bad though, on the contrary, the data under the hood was better than the prior month. That helped the greenback to erase the weekly losses.
Nevertheless, the trend in the labour market continues to remain skewed to the downside and time will tell if the Fed’s cuts will be enough to stop this trend.
The probabilities for the Fed to cut by 50 bps at the upcoming meeting dropped to 27% following the NFP report with a total of 110 bps of easing expected by year-end. For the BoC, the market sees a 99% probability of no change at the upcoming meeting and a total of 58 bps of easing by year-end.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD is approaching the key resistance around the 1.36 handle. That’s where we can expect the sellers to step in with a defined risk above the resistance to position for a drop back into the 1.34 handle. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 1.38 handle next.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair is now trading between two key levels: the 1.34 support and the 1.36 resistance. There’s not much else we can glean from this timeframe as the sellers would be better off leaning on the resistance, while the buyers will have a stronger confirmation for more upside on a break above the resistance.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we got a spike to the downside on the NFP release and then a rally as the market digested the better than feared details. A break above the recent high at 1.3582 should increase the buying pressure into the 1.36 resistance zone.
The buyers will also have an opportunity to buy the dip on a drop into the 1.3530 zone, while the sellers will look for a break to the downside to position for a fall into the 1.34 handle. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we have the US Small Business Optimism Index. On Wednesday, we get the US CPI report. On Thursday, we have the latest US Jobless Claims figures and the US PPI data. On Friday, we conclude the week with the University of Michigan Consumer Sentiment report.
