Fundamental Overview
The weak US NFP report last Friday triggered risk-off flows. Things got dire on Monday as the Japanese Nikkei dropped 12% overnight and we saw a general selloff in global stock markets.
At one point, the markets saw the Fed cutting rates by 136 bps by year-end and some chances of an emergency rate cut. Although the volatility calmed down a bit and markets recovered the Monday’s losses, the expectations haven’t changed much as the market is still pricing a higher probability for a 50 bps cut by the Fed in September and a total of 103 bps by year-end.
The USD gained against the commodity currencies like the CAD during the risk-off flows but eventually the mood in the markets improved and the greenback gave back all the gains. For the BoC, the market is assigning a 95% probability of a 25 bps cut in September and a total of 65 bps of easing by year-end.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD spiked above the 1.3860 resistance on Monday due to the global stock market rout but eventually gave back all the gains as the mood in the market improved.
The price yesterday fell below the key 1.3785 level and the sellers started to pile in with a defined risk above the level to position for a drop all the way back to the 1.36 support. The buyers, on the other hand, will want to see the price rising back above the 1.3785 level to step back in and increase the bullish bets into new highs.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the recent price action with the spike and then the selloff which saw the price falling back below the key 1.3785 level. The sellers should be in control as long as the price stays below the 1.3785 resistance.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a downward trendline defining the current bearish momentum. The buyers will want to see the price breaking above the trendline and the 1.3785 resistance to regain control and increase the bullish bets into new highs. The sellers, on the other hand, will likely keep on leaning on the trendline to keep pushing into new lows. The red lines define the average daily range for today.
Upcoming Catalysts
This week is basically empty on the data front. The only notable economic releases will be on Thursday when we get the latest US Jobless Claims figures and on Friday when we get the Canadian jobs data. The market will also pay close attention to Fed members’ comments given the latest developments in the markets.
