Fundamental
Overview
The bullish momentum in the
US Dollar seems to be waning despite the recent higher-than-expected US CPI and PPI reports. One caveat is that the market has now
priced out the aggressive rate cuts expectations and it’s almost perfectly in
line with the Fed’s projections.
Therefore, we will likely
need more strong US data to see the market pricing in an earlier pause in the
Fed’s easing cycle and give the US Dollar a further boost.
In the bigger picture, it
looks like the US long term yields are bound to rise further, which should keep
the recent uptrend in the USD intact, but more bullish catalysts for the
greenback would give more conviction for the buyers.
The next big risk events
will be in November when we get the October data and the US election.
On the CAD side, the market
is pricing in a 48% probability of a 50 bps cut at the upcoming meeting. Today,
we get the Canadian CPI report where soft data will likely seal the 50 bps cut,
while higher than expected figures might trigger a relief rally in the CAD.
USDCAD
Technical Analysis – Daily Timeframe
USDCAD Daily
On the daily chart, we can
see that USDCAD is now trading above the key resistance around the 1.3785 level. The
sellers will want to see the price falling back below the level to position for
a drop into the 1.36 support. The buyers, on the other hand, will likely keep
on piling in around these levels to position for further upside into the 1.3860
level.
USDCAD Technical
Analysis – 4 hour Timeframe
USDCAD 4 hour
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 pile in
for a drop into the 1.36 support.
USDCAD Technical
Analysis – 1 hour Timeframe
USDCAD 1 hour
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 keep on leaning on the trendline,
while the sellers will look for a break. Watch out for today’s Canadian CPI as higher
than expected data might trigger a relief rally in the CAD. The red lines
define the average daily range for today.
Upcoming
Catalysts
This week is pretty empty on the data front with just a couple of key economic
releases. Today, we get the Canadian CPI report. On Thursday, we have the US
Retail Sales and US Jobless Claims data.