Fundamental Overview
The USD yesterday weakened across the board following soft US Jobless Claims and ISM Services PMI reports. Overall, the data didn’t change much in terms of interest rates expectations, but it reinforced the view that the Fed is going to deliver at least two rate cuts by the end of the year.
The CAD, on the other hand, has been under pressure mainly due to the US Dollar strength last week which has been influenced more by quarter-end flows rather than something fundamental. This week, the US Dollar is back on the defensive as the market continues to trade the soft-landing narrative.
Last week, the Canadian CPI surprised to the upside, with the underlying inflation measures rising but remaining within the 1-3% target band. This made the market to pare back rate cuts expectations with the probabilities now standing around 57% for no change. We will get another inflation report before the next BoC policy decision, but if we see another jump in wage growth tomorrow, then the central bank will likely need very good CPI figures to deliver a rate cut in July.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD is now back at the key 1.36 support zone. Again, we can expect the buyers to step in with a defined risk below the support to position for a rally back into the 1.3785 resistance. The sellers, on the other hand, will want to see the price breaking lower to pile in more aggressively and target a drop into the 1.34 handle next.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price action remains rangebound between the 1.36 support and the 1.3785 resistance. There’s not much to do here and the market participants will likely keep on “playing the range” until we get a breakout.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a downward minor trendline defining the current bearish momentum. The buyers will want to see the price breaking higher and rally above the 1.3643 level to increase the bullish bets into the 1.3785 resistance.
The sellers, on the other hand, will likely lean on the trendline to position for a downside breakout with a defined risk above the 1.3642 level. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we conclude the week with the US NFP and the Canadian labour market report.
