Fundamental Overview
The US Dollar is now lower across the board as the market erased most of the greenback’s gains following Trump’s victory. This has been a puzzling reaction as Trump’s policies are likely to spur growth and potentially end the Fed’s easing cycle earlier than expected.
We can argue that the market was already positioned for a Trump’s victory as we saw the greenback rallying for a couple of weeks leading into the US election. So, this might just be a “sell the fact” reaction and the market might now need more to keep bidding the USD.
Another possible explanation is that the market is more focused on global growth now and that’s generally bearish for the greenback. We saw something similar in 2016 when the USD rallied strongly once Trump got elected but after a couple of months, it went into a 2-year long downtrend.
The Fed for now remains neutral and on track to keep cutting rates. Yesterday, they cut by 25 bps as expected and given the overall neutral message, the market expects another 25 bps cut in December. Strong data from now until the December meeting though could change their plans for 2025.
We have the US CPI report next week and that’s going to be a test. If the US Dollar sells off on hot data, then the market might be indeed focusing on global growth rather than the potential for an earlier pause in the Fed’s easing cycle.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD rejected once again the 2-year highs amid some USD weakness. The buyers will want to see the price breaking above the high to increase the bullish bets into new highs, while the sellers will look for a break below the recent low around the 1.3825 level to pile in more aggressively for a drop into the 1.36 handle.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong support zone around the 1.3825 level where the price got rejected from several times in the past weeks. We may now have a range between the 1.3825 level and the 1.3950 level. The market participants will continue to play the range until we get a breakout on either side.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as the rangebound price action makes all the technical levels between the main support and resistance pretty weak. The red lines define the average daily range for today.
Upcoming Catalysts
Today, we conclude the week with the Canadian Labour Market data and the US University of Michigan Consumer Sentiment report.