Fundamental Overview
The USD has finally got some relief since last week after being battered for weeks. The focus is now on the key data this week with the ISM Manufacturing PMI today and the NFP report on Friday in the spotlight.
The market is waiting for the key economic releases this week, and especially the NFP report, as that will likely decide whether the Fed is going to deliver a standard 25 bps cut or go for a more aggressive 50 bps cut in the upcoming meeting.
Right now, it looks like the Fed is going to cut rates into a resilient economy, which has been a positive driver for the risk sentiment, but if the data deteriorates further, it could trigger recessionary fears.
Therefore, besides the headline ISM number today, watch also the employment sub-index as a drop into new lows could spook the markets while an improvement could lead to a positive sentiment.
Tomorrow, we have also the BoC Rate Decision where the central bank is expected to cut rates by 25 bps. The recent CPI report showed some more easing in the underlying inflation measures and the labour market data was pretty soft.
Overall, it doesn’t look like the central bank will go for a 50 bps cut but it cannot be completely ruled out. Including the September cut, the market expects a total of 75 bps of easing by year end.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD bounced near the 1.34 handle after an incredible run to the downside. From a risk to reward perspective, the sellers will have a better setup around the 1.36 handle where they will find a strong resistance where to lean onto to position for a drop into the 1.32 handle. The buyers, on the other hand, will want to see the price breaking above the 1.36 resistance to get back control and position for a rally into the 1.38 handle.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have minor upward trendline defining the current bullish momentum. The buyers will likely keep on leaning on it to target the 1.36 resistance, while the sellers will want to see the price breaking lower to increase the bearish bets into the 1.34 handle.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see the recent price action with some clean higher highs and higher lows on this timeframe. For now, the buyers remain in control and the sellers will need the price to break below the trendline to change the bias back to bearish. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US ISM Manufacturing PMI. Tomorrow, we have the BoC Rate Decision and the US Job Openings. On Thursday, we get the US Jobless Claims figures and the ISM Services PMI. Finally, on Friday, we conclude the week with the Canadian labour market report and the US NFP.
