Fundamental Overview
Yesterday, the USD got a boost from a higher than expected US CPI report but gave back the gains pretty quickly. There are two reasons for such a reaction.
The first is that at the same time of the US CPI release we got the US Jobless Claims figures which jumped to the top of their yearly ranges. The culprit was attributed mainly to Hurricane Helene and the strikes.
The second reason is that the market was already positioned for a higher than expected reading as we’ve been seeing consistent upside in Treasury yields and the US Dollar in the days leading up to the release. Therefore, we got kind of a “sell the fact” reaction.
On net, it was a slightly hawkish report but it looks like the market needs some more reasons to keep bidding the US Dollar now that the market’s pricing is back in line with the Fed’s projections.
On the CAD side, the market is pricing in a 52% probability of a 50 bps cut at the upcoming meeting. Today, we get the Canadian labour market report where weak data will likely strengthen the chances for a 50 bps cut.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD is now trading near a key resistance around the 1.3785 level. This is where we can expect the sellers to step in with a defined risk above the level to position for a drop back into the 1.36 support. The buyers, on the other hand, will want to see the price breaking higher 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 had a huge rally the lows with basically no pullback. We have a steep upward trendline defining the current bullish momentum. The buyers will likely keep on leaning on it to position for further upside, while the sellers will want to see the price breaking lower to increase the bearish bets into the 1.36 support.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the recent price action and the steep trendline. There’s not much else to see here as the buyers will look for a break of the resistance or a bounce on the trendline to keep targeting new highs. The sellers, on the other hand, will likely pile in around these levels or wait for a break below the trendline to position for new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the Canadian Labour Market report, the US PPI and the University of Michigan Consumer Sentiment survey.