Fundamental Overview
Last Friday, Fed Chair Powell delivered a more dovish than expected speech at the Jackson Hole Symposium as he basically kept the door open for a 50 bps cut at the September meeting. In fact, the line saying that they will do everything they can to support a strong labour market was key.
That pushed Treasury yields lower and weighed on the US Dollar across the board. In fact, the recent appreciation of the CAD has been mostly driven by the US Dollar side of the equation. The Bank of Canada started its easing cycle before the Fed and the market expects the central bank to continue to deliver rate cuts at each of the remaining meeting for this year.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD eventually managed to break below the key support zone around the 1.36 handle. The sellers piled in more aggressively and extended the drop into the 1.34 price region. The next key level comes around the 1.3420 level where we can expect the buyers to step in with a defined risk below it to position for a correction back into the 1.36 handle.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the sellers will have a better risk to reward setup around the trendline where they will also find the confluence of the 38.2% Fibonacci retracement level. The buyers, on the other hand, will want to see the price breaking above the trendline to position for a rally into the 1.36 resistance zone.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the big push lower on Friday triggered by Powell’s speech. There’s not much else we can glean from this timeframe as the sellers will likely wait for a pullback into the trendline, while the buyers will look for a break above it. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US Consumer Confidence report. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude with the US PCE report.