Fundamental Overview
The USD regained some strength in latter part of last week. From the monetary policy perspective, nothing has changed as the market continues to expect at least two rate cuts by the end of the year and sees some chances of a back-to-back cut in November.
The data continues to suggest that the US economy remains resilient with inflation slowly falling back to target. Overall, this should continue to support the soft-landing narrative and be positive for risk sentiment. The new driver could be Trump now looking more and more like a potential winner and his policies are seen as inflationary which could see the Fed eventually going even more slowly on rate cuts.
The CAD, on the other hand, has been supported against the US Dollar in the past weeks mainly because of the risk-on sentiment, although that has changed last week. On the monetary policy front, the recent Canadian CPI sealed the rate cut at the upcoming meeting as the data missed expectations across the board.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD bounced from the key 1.36 support zone and extended the rally all the way back to the key resistance around the 1.3785 level.
This is where we can expect the sellers to step in with a defined risk above the resistance to position for a drop back into the 1.36 support. The buyers, on the other hand, will want to see the price breaking above the resistance to increase the bullish bets into the 1.3860 level next.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a trendline defining the bullish momentum. From a risk management perspective, the buyers will have a better risk to reward setup at the trendline to target a break above the resistance. The sellers, on the other hand, will want to see the price breaking below the trendline to increase the bearish bets into the 1.36 support.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can more clearly the recent price action. There’s not much to do here other than waiting for the price to reach the key levels. The red lines define the average daily range for today.
Upcoming Catalysts
This week is pretty empty on the data front. We begin tomorrow with the BoC Policy Decision and the US Flash PMIs. On Thursday, we will get the latest US Jobless Claims figures. Finally, on Friday we conclude the week with the US PCE report.
