Fundamental Overview
The USD continues to be backed by good economic data as we have also seen recently from the US PMIs last Friday and the US Consumer Confidence report this week. Although such data keeps the interest rates expectations stable around two cuts by the end of the year, it should also support the risk sentiment amid a pickup in growth. This could be a headwind for the greenback.
This week the US Dollar has been in the driving seat, although it looks like the price action is being influenced more by month-end, quarter-end and half year-end flows rather than something fundamental. We had also a key breakout in USDJPY yesterday and flows there might have spilled over to other major pairs.
We got also the Canadian CPI figures this week which surprised to the upside and trimmed rate cuts expectations for July with the market now pricing a 65% chance of no change. That was not enough to break out of the strong support zone around the 1.36 handle as it didn’t change much the bigger picture, but it might keep the Loonie supported going forward once the quarter-end flows fade out.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD bounced on the key support zone around the 1.36 handle. That’s where the buyers continue to step in with a defined risk below the support to position for a rally back into the 1.3785 resistance. The sellers will want to see the price breaking lower to pile in more aggressively and target a drop into the 1.34 handle next.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price yesterday broke above the 1.3680 resistance and pulled back to retest it today. We can also see that we have the 38.2% Fibonacci retracement level for confluence there.
This is where the buyers will likely step in with a defined risk below the level to target an extension of the rally towards the 1.3785 resistance. The sellers, on the other hand, will want to see the price falling back below the level to regain some control and position for a break below the 1.36 support with a better risk to reward setup.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we had also a downward trendline adding some extra confluence to the 1.3680 resistance. This breakout might give the buyers more conviction for a rally back into the 1.3785 resistance next. 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 GDP and the US PCE report.
