Fundamental
Overview
On Wednesday, the Fed
finally started its easing cycle and decided to do it with a 50 bps
cut. The market was already leaning towards a 50 bps move, so it wasn’t a
surprise.
The larger cut was framed
as kind of an “insurance” cut with the dot plot showing two more 25 bps cuts by
the end of the year and less than the market expected in 2025.
The US Dollar didn’t get a
boost despite the rise in Treasury yields. Now that the decision is behind us,
the focus will be on the economic data.
If we start to see an
improvement, then Treasury yields will likely continue to rise and lead to a
reprising in the dovish expectations supporting the greenback in the
short-term.
Conversely, if the data
weakens, the market will likely go ahead with expecting more 50 bps cuts by
year-end and weighing on the US Dollar.
On the CAD side, the latest
soft Canadian
CPI raised the probabilities for a 50 bps cut at the upcoming meeting as
BoC’s Macklem hinted to a possibility of delivering larger cuts in case growth
and inflation were to weaken more than expected.
USDCAD
Technical Analysis – Daily Timeframe
USDCAD Daily
On the daily chart, we can
see that USDCAD probed above the key resistance around the 1.36 handle but
eventually got smacked back down. The price action remains choppy as the market
now awaits more data to pick a direction. The buyers will want to see the price
breaking higher to start targeting the 1.38 handle, while the sellers will
likely keep on defending the resistance for now.
USDCAD Technical
Analysis – 4 hour Timeframe
USDCAD 4 hour
On the 4 hour chart, we can
see that the pair is trading in a tight range between the 1.3550 support and
the 1.36 resistance. The buyers will want to see the price breaking out to the
upside to increase the bullish bets into new highs, while the sellers will look
for a break lower to pile in for a drop back into the 1.34 handle.
USDCAD Technical
Analysis – 1 hour Timeframe
USDCAD 1 hour
On the 1 hour chart, we can
see more clearly the choppy price action. There’s not much else to add here as
the market participants will wait for a breakout on either side. The red lines
define the average daily range for today.