Fundamental Overview
On Wednesday, the Fed finally started its easing cycle and decided to do it with a 50 bps cut. The market was already leaning towards a 50 bps move, so it wasn’t a surprise.
The larger cut was framed as kind of an “insurance” cut with the dot plot showing two more 25 bps cuts by the end of the year and less than the market expected in 2025.
The US Dollar didn’t get a boost despite the rise in Treasury yields. Now that the decision is behind us, the focus will be on the economic data.
If we start to see an improvement, then Treasury yields will likely continue to rise and lead to a reprising in the dovish expectations supporting the greenback in the short-term.
Conversely, if the data weakens, the market will likely go ahead with expecting more 50 bps cuts by year-end and weighing on the US Dollar.
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.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD probed above the key resistance around the 1.36 handle but eventually got smacked back down. The price action remains choppy as the market now awaits more data to pick a direction. The buyers will want to see the price breaking higher to start targeting the 1.38 handle, while the sellers will likely keep on defending the resistance for now.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair is trading in a tight range between the 1.3550 support and the 1.36 resistance. The buyers will want to see the price breaking out to the upside to increase the bullish bets into new highs, while the sellers will look for a break lower to pile in for a drop back into the 1.34 handle.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the choppy price action. There’s not much else to add here as the market participants will wait for a breakout on either side. The red lines define the average daily range for today.