Fundamental Overview
The USD remains on the backfoot as the US data continues to point to resilient growth with falling inflation. Yesterday, we got a good US Retail Sales report suggesting that the stories of deteriorating consumer spending might have been exaggerated. Overall, this should support the soft-landing narrative and be positive for the risk sentiment.
The CAD, on the other hand, remains supported against the US Dollar mainly because of the risk-on sentiment. This morning we’ve been seeing even more weakness for the greenback which might be due to the selloff in the USDJPY pair as flows there could have spilled over into other markets. On the monetary policy front, yesterday’s Canadian CPI sealed the rate cut at the upcoming meeting as the data missed expectations across the board.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD bounced from the key 1.36 support zone and extended the rally into the 1.37 handle before pulling back. If the price falls back into the support zone, we can expect the buyers to step in once again to position for a rally back into the 1.3785 resistance. The sellers, on the other hand, will want to see the price breaking below the support zone to increase the bearish bets into the new lows with the 1.35 handle as the first target.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price this week broke out of the tight range between 1.3600 and 1.3650 levels and extended the rally into the 1.37 handle. We are now seeing a pullback into the resistance turned support at 1.3650 where we can expect the buyers to step in to position for the continuation of the rally. The sellers, on the other hand, will want to see the price falling back below the 1.3650 level to increase the bearish bets into the 1.36 support targeting a breakout.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price today fell below the upward trendline that was defining the recent bullish momentum. This might be a reversal signal or just a more complex pullback. A break above the downward trendline should give the buyers more confidence for new highs, while the sellers will likely lean on it to position for a break below the 1.3650 level. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have Fed’s Waller speaking. Tomorrow, we have the latest US Jobless Claims figures, while on Friday we conclude with the Canadian Retail Sales data.