Fundamental Overview
The USD has been stronger since last Friday following the US NFP report where the data surprised with solid jobs and wage growth. There were also negatives like the uptick in the unemployment rate, but all in all, we can say that it was a good report.
The data triggered a hawkish repricing in interest rates expectations with the market now expecting once again just one cut by the end of the year. It’s not a big deal in the bigger picture, but for now the sentiment is bullish for the greenback and we will likely need a catalyst to change it again.
The CAD, on the other hand, has been already 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.
If we go back into risk-on sentiment, the greenback could start to lose ground against the major currencies again, so the US CPI report today will be key as the recent breakout could be invalidated in case we get soft data. On the other hand, if we get a hot report, we should see the pair reach the 1.3861 level in the next weeks.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD broke out of the recent range as it breached the 1.3740 resistance following the US NFP release. The target for the buyers remains the 1.3860 level and we can expect them to pile in around the recent resistance now turned support.
The sellers, on the other hand, will want to see the price falling back below the 1.3740 zone to invalidate the bullish bias and start looking for a drop back into the 1.36 support.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the breakout and the support now around the 1.3740 level where we can also find the 38.2% Fibonacci retracement level for confluence.
This is where we can expect the buyers to step in with a defined risk below the support to position for a rally into the 1.3860 level with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking lower to position for a drop back into the 1.36 support.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a trendline around the 1.3720 level which is going to be the last line of defence for the buyers in case the price dips below the support. The red lines define the average daily range for today but do note that the price can extend beyond them when there are strong catalysts like today’s US CPI report.
A hot report should give the buyers even more conviction to increase the bullish bets into new highs, while in-line or soft data will likely give the sellers more control.
Upcoming Catalysts
Today we get the US CPI data and the FOMC rate decision. Tomorrow, we have the US PPI and the latest US Jobless Claims figures. On Friday, we conclude the week with the University of Michigan Consumer Sentiment survey.
