Fundamental
Overview
The USD has been marginally
weaker recently due to lower than expected US inflation figures last week that
sent Treasury yields lower and made the market to price in higher chances of a
second rate cut by the end of the year.
Yesterday, the greenback
weakened across the board following a WSJ report saying that Trump would lay out the
trade vision but won’t impose tariffs yet. Tonight though, he spoke to the
media and said that he intends to impose 25% tariffs on Canada and Mexico next week.
Following the news, the US Dollar erased almost all the losses from the prior
day.
On the CAD side, as a
reminder, the BoC cut interest rates by 50 bps at the last policy meeting but dropped the
line saying “if the
economy evolves broadly in line with our latest forecast, we expect to reduce
the policy rate further”, which suggests that we reached the peak in “dovishness” and the central bank will now switch to 25 bps cuts and
will slow the pace of easing.
Today, we have the Canadian
CPI report which is expected to show some more easing in the underlying
inflation. The market is pricing an 80% chance of a 25 bps cut at the upcoming
meeting and a total of 60 bps of easing by year end.
USDCAD
Technical Analysis – Daily Timeframe
USDCAD Daily
On the daily chart, we can
see that USDCAD broke below the major trendline yesterday but eventually
bounced back as Trump talked about 25% tariffs on Canada. The sellers will want
to see the price breaking below the trendline again to gain conviction for new
lows, while the buyers will continue to step in around the lows to position for
the rally into the 2020 high around the 1.4670 level.
USDCAD Technical
Analysis – 4 hour Timeframe
USDCAD 4 hour
On the 4 hour chart, we can
see that the pair continues to range between the 1.4300 support and the 1.4470 resistance. The market
participants will keep on playing the range until we get a breakout on either
side.
USDCAD Technical
Analysis – 1 hour Timeframe
USDCAD 1 hour
On the 1 hour chart, there’s
not much else we can add here as the buyers will continue to step in around the
bottom of the range, while the sellers will pile in around the top. The red
lines define the average daily range for today.
Upcoming
Catalysts
Today we have the Canadian CPI report. On
Thursday, we get the latest US Jobless Claims figures, while on Friday we
conclude the week with the Flash US PMIs.