Fundamental Overview
Late Thursday, around 1:00 PM ET, WSJ’s Timiraos published an article which seemed suggesting that a 50 bps cut was still being discussed. The market responded by raising 50 bps cut probabilities to around 40% from 13% before the news.
Nick Timiraos is considered a Fed “insider”, so the market is attentive to all of his pieces concerning potential Fed decisions. The probability for the Fed to cut by 50 bps at the upcoming meeting stand now around 60% with a total of 118 bps of easing by year-end.
These repricing weakened the US Dollar across the board as Treasury yields fell further. Once we are done with the Fed decision, the focus will switch back to the economic data. In case we start to see better figures, the market might start to pare back the aggressive easing expected in 2025 supporting the greenback in the short-term.
For the BoC, the market sees a 25% probability of a 50 bps cut at the upcoming meeting and a total of 68 bps of easing by year-end. Governor Macklem last week raised the prospect of larger cuts if growth and inflation were to fall more than expected.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD is testing the key resistance around the 1.36 handle. This is where the sellers are stepping 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 in a tight range between the 1.3560 support and the 1.36 resistance. The buyers will want to see the price breaking out to the upside to increase the bullish bets into new highs, while the sellers will look for a break lower to pile in for a drop back into the 1.34 handle.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the tight range and the choppy price action. There’s not much else to add here as the market participants will wait for a breakout on either side. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the Canadian CPI, the US Retail Sales and the US Industrial Production data. On Wednesday, we have the FOMC Rate Decision. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude with the Canadian Retail Sales.