Fundamental Overview
The USD weakened across the board last Friday following the soft US NFP report. The data showed some more labour market cooling with an increase in the unemployment rate and a decrease in wage growth. We basically have an economy that is slowing but growing. We will see if the market will be able to keep the positive sentiment on soft landing hopes or start to worry about a recession. All eyes will now be on the US CPI and US Jobless Claims figures on Thursday.
The CAD, on the other hand, gained last week against the US Dollar mainly because of the risk-on sentiment as the US data continued to support at least two rate cuts from the Fed but didn’t send recessionary signals. For the CAD, the next big event will be the CPI report on July 16th. We saw another jump in wage growth in the latest labour market report, so the BoC will likely need good CPI figures to deliver a rate cut in July.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD has recently dropped back to the bottom of the range at the key 1.36 support zone where the price bounced off of last Friday.
The buyers will likely keep on stepping in around these levels to position for a rally back into the 1.3785 resistance with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking lower 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 action remains rangebound between the 1.36 support and the 1.3785 resistance. There’s not much to do here and the market participants will likely keep on “playing the range” until we get a breakout.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price broke out of the recent downward minor trendline that was defining the bearish momentum before bouncing from the support. This could be a signal of a change in momentum.
The buyers will want to see the price breaking above the most recent lower high at 1.3643 to increase the bullish bets into the 1.3785 resistance. The red lines define the average daily range for today.
Upcoming Catalysts
This week is a bit bare on the data front but nonetheless we will have some key economic releases. Tomorrow, we have Fed Chair Powell testifying to Congress and the markets will be focused on any view or hint about the monetary policy trajectory after the recent NFP report. Thursday will be the most important day of the week as we get the US CPI and the US Jobless Claims figures. Finally, on Friday, we conclude the week with the US PPI and the University of Michigan Consumer Sentiment survey.
