Fundamental Overview
Last week, despite the higher-than-expected inflation figures and a less dovish Powell, the US Dollar couldn’t extend the gains. The market’s pricing remained largely unchanged at three rate cuts by the end of 2025.
This might be a signal that the market is now fine with the current pricing, and we will need stronger reasons to price out the remaining rate cuts. This could open the door for some pullbacks and general US Dollar weakness.
On the CAD side, we have the Canadian CPI tomorrow. The market is pricing a 33% chance of another 50 bps cut at the upcoming meeting. Higher than expected readings might increase the chances of a 25 bps move and provide a relief rally.
Conversely, lower than expected figures will likely increase the probabilities for a 50 bps cut and weigh a bit on the CAD although it might not trigger too much weakness at this point.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD eventually broke through the 2-year high and extended the rally into the 1.41 handle. From a risk management perspective, the buyers will have a better risk to reward setup around the previous resistance now turned support at roughly 1.40 where we can also find a trendline for confluence. The sellers, on the other hand, will want to see the price breaking lower to invalidate the breakout and position for a drop back into the 1.36 handle.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have another minor upward trendline defining the current bullish momentum. If we were to get a pullback, we can expect the buyers to lean on the trendline to position for a rally into new highs, while the sellers will look for a break lower to target the major trendline.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we have yet another upward trendline defining the bullish momentum on this timeframe. The buyers will keep on leaning on it to target new highs, while the sellers will look for a break lower to target the next trendlines. The red lines define the average daily range for today.
Upcoming Catalysts
This week is pretty empty on the data front with the most important releases scheduled for the latter part of the week. On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the US Flash PMIs.