Fundamental Overview
The USD continues to consolidate around the highs except against the commodity currencies where it’s been having the upper hand. The US inflation data last week was once again a disappointment although the data that feeds into the Core PCE was overall benign as forecasters expect a 0.13% M/M increase.
Nonetheless, the
Treasury yields continue to climb and are now back around the post-US election highs. There’s some understandable uneasiness in the bond market given the hot US data and the Fed continuing to cut into an accelerating economy.
On the CAD side, the BoC recently
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.
The market now expects two 25 bps cuts by the end of 2025 with the first cut fully priced in for March.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD keeps making new highs amid a strong rise in Treasury yields. From a risk management perspective, the buyers will have a better risk to reward setup around the
trendline to position for new highs. The sellers, on the other hand, will want to see the price breaking lower to regain control and start targeting new lows.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor upward trendline defining the current bullish momentum on this timeframe. The buyers will likely keep on leaning on the trendline to position for new highs, while the sellers will look for a break lower to extend a potential pullback into the major trendline.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as the buyers will look for a bounce on the trendline, while the sellers will aim for a break lower. The red lines define the
average daily range for today.
Upcoming Catalysts
Today, we get the Canadian CPI report and the US Retail Sales data. Tomorrow, we have the FOMC Policy Decision. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the Canadian Retail Sales and the US PCE data.
This article was written by Giuseppe Dellamotta at
www.forexlive.com.
