Fundamental Overview
The losses peaked for the Canadian Dollar last Monday as the volatility normalised, and we got some good US data throughout the week. That helped to turn around the risk sentiment and give the Loonie a boost.
The market has been slowly paring back the aggressive rate cuts expectations for the Fed as now a 25 bps cut in September is seen as more likely with a total of 98 bps of easing by year-end. On the BoC side, the market is fully pricing a 25 bps cut in September and a total of 73 bps of easing by year-end.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD spiked above the 1.3860 resistance last Monday due to the global stock market rout but eventually gave back all the gains as the mood in the market improved.
The sellers piled in at every break lower and extended the drop into the 1.3720 level. The natural target should be the strong support zone around the 1.36 handle. The buyers, on the other hand, will want to see the price breaking above the 1.3785 level again to regain some control and position for new highs.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is consolidating around the 1.3720 level. The sellers will want to see the price breaking lower to increase the bearish bets into the 1.36 handle. The buyers, on the other hand, will likely keep on stepping in around the lows with a defined risk below to position for a rally into a new cycle high.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the recent price action formed a descending triangle. The price can break on either side of the pattern but follows next is generally a more sustained move in the direction of the breakout. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the US PPI data. On Wednesday, we have the US CPI report. On Thursday, we get the US Retail Sales and Jobless Claims figures. Finally, on Friday, we conclude the week with the University of Michigan Consumer Sentiment survey.