Fundamental Overview
The USD yesterday came under pressure following the miss in the US ISM Manufacturing PMI which triggered a drop in Treasury yields. In terms of market pricing, not much has changed as we still oscillate between one and two rate cuts by the end of the year. Nonetheless, the data reinforced the narrative that the next move is more likely to be a rate cut, and that inflation is likely to keep coming back to target.
The CAD, on the other hand, is a bit under pressure from the negative risk sentiment and the drop in oil prices. Tomorrow, we have the BoC Policy Decision where the central bank is expected to cut interest rates from 5.00% to 4.75%. If they refrain from cutting rates, that could give the CAD a short term boost although it wouldn’t change the bigger picture as the BoC will likely cut the next meeting.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD yesterday bounced on the key support zone around the 1.36 handle where we can also find the confluence of the 61.8% Fibonacci retracement level. The buyers continue to step in around that support with a defined risk below it to position for a rally into the 1.3860 high. The sellers will need to see the price breaking below the support to gain more conviction and increase the bearish bets into the 1.34 handle.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a downward trendline acting as resistance around the 1.3730 level. We can also notice that the price has been printing consistently lower highs which is technically a sign of a downtrend. It looks like the sellers have some control for now as the buyers will need the price to break above the 1.3740 swing high to invalidate the bearish bias.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have the upper limit of the average daily range near the swing high at 1.3690. This is where we might start to see a rejection as the sellers could pile in with a defined risk above the swing high to position for a break below the support with a better risk to reward setup. Overall though, there’s not much to do here as market participants continue to play the range.
Upcoming Catalysts
Today we have the US Job Openings data. Tomorrow, we have the BoC Policy Decision, the US ADP and the US ISM Services PMI. On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the Canadian Jobs data and the US NFP report.