Fundamental Overview
The US Dollar continues to consolidate around the highs as the market reached the peak in the repricing of interest rates expectations and it will need stronger reasons to price out the remaining rate cuts for 2025.
This was signalled by the lack of US Dollar strength after lots of strong US data with the market’s pricing remaining largely unchanged around three rate cuts by the end of 2025. We might see the greenback remaining on the backfoot at least until the US CPI due next week.
On Monday, Fed’s Waller and Fed’s Williams sounded like a rate cut in December is basically a done deal with the plan to slow the pace of rate cuts considerably in 2025. That’s in line with the market’s pricing.
We will likely need another hot CPI report to force them to skip the December cut. In case the data comes out as expected or even misses forecasts, then we can expect more USD weakness.
On the CAD side, we had the Canadian CPI recently and the data came in stronger than expected. This decreased the chances of a 50 bps cut in December with the market now seeing a 40% chance for such a move. As a reminder, the BoC is now focused on growth as they met their inflation target.
Tomorrow, we get the Canadian labour market report alongside the US NFP. Better than expected data should see the probabilities for a 25 bps cut increasing and give the CAD some support, especially if the US NFP doesn’t come out too strong. On the contrary, weaker than expected figures could weigh on the CAD but we might not see a new cycle high if the USD remains weak.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD is consolidating around the highs after the brief spike on the Trump’s tariffs threat. The market is still waiting for the US NFP and the US CPI before picking a direction, so there’s not much to see here. The sellers will need the price to fall below the 1.3950 level though to start targeting new lows as such a break should switch the bias from bullish to bearish.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a trendline defining the current bullish momentum on this timeframe. If we get a pullback into it, we can expect the buyers to lean on the trendline to position for a rally into a new cycle high. The sellers, on the other hand, will want to see a break below the trendline and the 1.3950 support to start targeting new lows.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor resistance zone around the 1.4090 level. The sellers will likely keep on stepping in around the resistance to target the 1.3950 support, while the buyers will look for a break higher to increase the bullish bets into a new cycle high. The red lines define the average daily range for today.
Upcoming Catalysts
Today, we get the latest US Jobless Claims figures, while tomorrow we conclude the week with the Canadian labour market data and the US NFP report.