The USD weakened across the
board yesterday following a notable miss in the US
initial claims data as that added some more pressure on the USD with the
market weighing the possibility that the labour market could weaken fast enough
in the next months to justify more rate cuts than expected. Overall though, the
price action has been rangebound this week as the lack of key catalysts and the
waiting for the US CPI report kept the market at bay.
The CAD, on the
other hand, has been under pressure in the first part of the week maybe due to
the sustained weakness in crude oil prices and expectations building for the BoC
to cut rates in June, although the employment data today and the Canadian CPI
report on May 21st will likely decide if the BoC will wait until July or
proceed with a cut already in June.
USDCAD
Technical Analysis – Daily Timeframe
USDCAD Daily
On the daily
chart, we can see that USDCAD bounced from the key support
zone around the 1.36 handle where we can also find the confluence
with the trendline
and the 61.8% Fibonacci
retracement level. A break below that support should see the sellers
gaining more conviction and increasing the bearish momentum into new lows. The
buyers, on the other hand, keep on stepping in around these levels to position
for a rally back into the cycle highs around the 1.39 handle.
USDCAD
Technical Analysis – 1 hour Timeframe
USDCAD 1 hour
On the 1 hour chart,
we can see that the upward trendline got breached recently with the sellers
piling in to extend the drop into the 1.36 support. From a risk management
perspective, the sellers will have a better risk to reward setup around the
downward trendline where they will also find the confluence of the 38.2% Fibonacci
retracement level and the 1.37 handle.
The buyers, on the
other hand, will want to see the price breaking higher to invalidate the
bearish setup and position for a rally into the 1.3785 level. The red lines
marked on the chart define the average
daily range of the pair, which is generally the maximum movement we can get
on any given day barring major surprises in the market.
Upcoming
Catalysts
Today we conclude the week with the Canadian labour market
report and the US University of Michigan consumer sentiment survey. Weak
figures across the board for the Canadian jobs data should raise the probabilities
for a rate cut in June, although there’s not much more to price in. In fact, the
next big event to watch will be the US CPI next Wednesday as that will likely
have a much bigger and lasting impact on the pair.