Fundamental Overview
The USD rallied across the board last Friday following the hot US NFP report. The market priced out all the aggressive expectations and it’s now finally in line with the Fed’s projections.
The focus remains on the economic data. The next key event to watch will be the US CPI report on Thursday. We will likely need a hot report to see a strong rally, while a big miss could see the market price back in a more aggressive path for rate cuts.
On the CAD side, the latest soft Canadian CPI raised the probabilities for a 50 bps cut at the upcoming meeting as BoC’s Macklem hinted to a possibility of delivering larger cuts in case growth and inflation were to weaken more than expected.
The market scaled back those probabilities following the surprisingly good Canadian Retail Sales, the GDP report and the US NFP report. On Friday, we get the latest Canadian Labour Market report which could influence the market’s pricing.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD now trades above the key 1.36 resistance as the USD got a boost from the strong US NFP report last Friday. The buyers will likely need a break above the recent high at 1.3650 to gain even more confidence for higher highs. The sellers, on the other hand, will want to see the price falling back below the 1.36 zone to position for a drop back into the 1.34 handle.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a strong rally from the lows. The area between the 1.36 and 1.3650 levels should be a buying zone for the buyers with a break to the upside likely increasing the bullish momentum. The sellers, on the other hand, will need the price to fall below the 1.36 handle to start targeting new lows with the trendline around the 1.35 handle as the first target.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor upward trendline defining the current bullish momentum. The buyers will likely keep on leaning on it to position for more upside, while the sellers will look for a break below the trendline and the 1.36 level to pile in for a drop into the next trendline. The red lines define the average daily range for today.
Upcoming Catalysts
This week the calendar is a bit empty on the data front. The main events are all scheduled for the latter part of the week. On Thursday, we have the US CPI and the US Jobless Claims. On Friday, we conclude with the Canadian Labour Market report, the US PPI and the University of Michigan Consumer Sentiment survey.