FUNDAMENTAL
OVERVIEW
USD:
The US dollar has been
bouncing around in the past few days as traders continue to wait for the US NFP
report. The US data this week has been mixed. We got a soft ISM Manufacturing
PMI on Monday but a strong Services PMI yesterday. The ADP was good despite a
slight miss, but Job Openings were soft.
In terms of macro, nothing
has changed. The market is still pricing 62 bps of easing by year-end with 57%
probability of a Fed cut coming in March at the earliest. We will need very
soft NFP and CPI data to force the Fed to cut at the upcoming meeting,
otherwise traders will just adjust the timing of the expected cuts in 2026 and
might even increase bets in the case of weak data.
Tomorrow, the US Supreme
Court scheduled an “opinion day”, so we might also potentially get a decision
on Trump’s tariffs.
CAD:
On the CAD side, the BoC held
interest rates steady at the last policy meeting but didn’t validate the
market’s rate hike bets just yet. In fact, the central bank kept a cautious
tone and highlighted the weak details in the last GDP and employment reports
despite acknowledging the improvements.
The last Canadian inflation
report saw the Trimmed Mean Y/Y falling to 2.8%, 0.1% lower than consensus and
0.2% than the prior month. That led to a slightly dovish repricing in interest
rate expectations. Tomorrow, we have the Canadian employment data and that
could give the CAD a boost in case we get another strong report.
USDCAD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDCAD squeezed higher in the past couple of weeks with the price now
trading near the key 1.39 resistance. This is where we can expect the sellers
to step in with a defined risk above the resistance to position for a drop into
the 1.3540 level. The buyers, on the other hand, will want to see the price
breaking higher to open the door for a rally into the 1.41 handle next.
USDCAD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see that we have a strong support zone around the 1.38 handle where the price
got rejected from several times in the past month. There’s also an upward
trendline adding confluence that should technically strengthen the support
zone. If we get a pullback into the support, we can expect the buyers to step
in with a defined risk below the trendline to position for a break above the
resistance. The sellers, on the other hand, will look for a break lower to
increase the bearish bets into the 1.3540 level next.
USDCAD TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can
see that we have another minor upward trendline defining the bullish momentum
on this timeframe. The buyers will have a better risk to reward setup around
the trendline to target new highs, while the sellers will keep on looking for
downside breaks to pile in for new lows
