March 04, 2025 at 10:34AM
Fundamental
Overview
The USD is losing ground
against the major currencies as the market continues to price in more easing by
the end of the year. The market is now expecting three rate cuts by the end of
the year which is in stark contrast to just one seen a couple of weeks ago.
The US data recently
started to miss expectations by a big margin and the market reacted by
adjusting its growth expectations. The Trump’s tariffs policy is also weighing
on growth expectations increasing the likelihood of faster Fed easing down the
road.
One constraint the Fed
might have could come from higher inflation expectations. In case we get a
slowdown, the Fed might not be fast enough in cutting rates amid inflation
remaining above target and uncomfortably high long-term inflation expectations.
This is something to keep in mind in light of the next NFP and CPI reports.
On the CAD side, 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. The risk-off sentiment though and the tariffs risk isn’t helping the
Loonie which weakened further yesterday as Trump confirmed the 25% tariffs of
Canada and Mexico coming into effect today.
USDCAD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDCAD eventually reached the 1.45 handle amid the tariffs risk.
Judging by the reaction to the tariffs news though, it seems like the market is
still hopeful for some last minute resolution as the spike higher is getting
faded. There’s not much we can glean from this timeframe as there’s been lots
of choppiness which makes hard to distinguish the signal from the noise.
USDCAD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have an upward trendline defining the bullish momentum. The
buyers will likely lean on the trendline with a defined risk below the 1.4365
level to keep pushing into new highs, while the sellers will look for a break
below the 1.4365 level to gain more conviction and pile in for a drop into the
1.40 handle next.
USDCAD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s
not much we can add here as the buyers will look for a bounce around the
trendline or the 1.4365 level, while the sellers will look for a break lower to
target new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today the market participants will be on
the lookout for tariffs headlines as they go into effect for Canada, Mexico and
China. Tomorrow, we have the US ADP and the US ISM Services PMI. On Thursday,
we get the latest US Jobless Claims figures. On Friday, we conclude the week
with the Canadian Employment data and the US NFP report.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
