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
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
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
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.
This article was written by Giuseppe Dellamotta at
www.forexlive.com.
