Fundamental Overview
The USD last week saw a quick dip across the board following the soft US CPI report as the market priced back in two rate cuts by the end of the year. The moves were reversed soon after though as we got a bit more hawkish than expected FOMC decision where the dot plot showed that the Fed expected just one cut for this year despite the soft US CPI report.
Later on, Fed Chair Powell backpedalled on the projections making them a bit less worrying as the central bank remains very data dependent. The US Dollar eventually got supported in the last part of the last week as the risk sentiment turned more cautious.
The CAD, on the other hand, has been a bit under pressure as the Bank of Canada delivered a slightly more dovish cut than expected. Overall, the central bank said that they remain data dependent and the rate cuts expectations didn’t change much.
The next Canadian CPI report will be important as it could weigh on the Loonie again if it surprises to the downside, although trading it against the USD might not be optimal as the pair could just keep on ranging amid some risk-on sentiment.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD got rejected by the resistance around the 1.3785 level as the sellers stepped in to position for a drop back into the key 1.36 support zone. From a risk management perspective, the buyers would be better off waiting for the price to eventually reach the support to position for a rally into new highs with a better risk to reward setup.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the rangebound price action between the 1.36 support and the 1.3785 resistance. The buyers will want to see a breakout to the upside to increase the bullish bets into the next resistance at 1.3860. The sellers, on the other hand, will need the price to break below the support zone to start looking for new lows with the 1.34 level as the first target.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a strong minor support zone around the 1.3710 level. This is where the buyers might lean onto to position for a break above the 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 1.3680 level next. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we have the US Housing Starts, Building Permits and the US Jobless Claims figures. On Friday, we conclude the week with the Canadian Retail Sales and the US PMIs.
