February 18, 2025 at 11:18AM
Fundamental
Overview
The US Dollar came under
pressure last week following the US PPI report as the details that feed into the Core
PCE index, which is what the Fed focuses on, were all very soft. That helped to
bring the early estimates down to more benign levels. In fact, the Core PCE Y/Y
is now projected to fall to 2.6% vs. 2.8% in the prior month. That’s good news
for the Fed.
The bearish momentum
increased eventually as the Trump’s tariffs saga came to an end. In fact, the
US President announced his reciprocal tariffs that could go into effect in April
but the overall tone of it wasn’t aggressive and sounded a lot like the start
of a negotiating process to bring tariffs to a fair level for everyone.
On the CAD side, it’s been
all about the US Dollar softness and with the markets now less concerned about
tariffs, the major currencies got the green light to appreciate against the
greenback.
The economic data out of
Canada has been showing gradual improvement and the central bank is now past
the peak in dovishness which should further support the CAD. Today, we have the
Canadian CPI and also the US-Russia talks in Saudi Arabia where positive
headlines will likely be supportive for the risk sentiment and could weigh
further on the dollar.
USDCAD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDCAD last week finally broke below the key support around the 1.4280 level and extended the drop
into new lows as the sellers piled in more aggressively. If we get a pullback
into the support now turned resistance, we can expect the sellers to step in
with a defined risk above the resistance to position for a drop into the 1.40
handle. The buyers, on the other hand, will want to see the price rising back
above the resistance to start targeting the 1.45 handle next.
USDCAD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see more clearly the recent price action with some consolidation near the
recent lows as the market awaits new catalysts. There’s not much else we can
glean from this timeframe so we need to zoom in to see some more details.
USDCAD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have a minor upward trendline defining the current pullback. The buyers
will continue to lean on it to keep pushing into new highs, while the sellers
will look for a break lower to increase the bearish bets into the 1.40 handle
next. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US-Russia talks in Saudi
Arabia and the Canadian CPI report. On Thursday, we get the latest US Jobless
Claims figures, while on Friday we conclude the week with the US Flash
PMIs.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
