Fundamental
Overview
The USD rallied across the
board last week after a slate of strong US data. The focus was mainly on Jobless Claims which beat expectations by a big
margin with Initial Claims falling to the lowest level since July and
Continuing Claims improving further. This triggered a hawkish repricing in
interest rates expectations since the Fed started cutting rates solely due to
weaker labour market data.
This means that if we
continue to get stronger labour market data, the Fed could start turning more
hawkish again and we might not get another cut in October, or more probably in
December. Therefore, there’s still plenty of room for the US dollar to appreciate
in case of strong data as the market’s pricing remains too dovish. The Fed
projected 75 bps of easing by the end of 2026, while the market is still
pricing 105 bps.
The greenback erased all
the gains triggered by last week’s data in the meantime as we are likely
experiencing a pullback after a very strong rally. Other possible reasons
include the government shutdown fears and quarter-end flows.
On the CAD side, the BoC
cut interest rates by 25 bps as expected at the last meeting following the very
weak Canadian employment report. Overall, the central bank stressed the need to
remain attentive to risks and setting policy on a meeting-by-meeting basis. The
market is pricing a 51% of no change at the upcoming meeting in October and 20
bps of easing by year-end. So, the market is still expecting at least another
cut this year. Next week, we have the Canadian employment report and that will likely
tell us if the BoC is going to cut again in October or not.
USDCAD
Technical Analysis – Daily Timeframe
USDCAD daily
On the daily chart, we can
see that USDCAD pushed above the August high last week invalidating the head and shoulders pattern that was forming around the
1.3862 level. The price has fallen back below the August high yesterday and
this could bring more selling pressure. In fact, the sellers will likely step
in around these levels with a defined risk above the 1.3925 level to position for
a drop back into the 1.3721 support.
The buyers, on the other hand, will want to see the price rising back above the
1.3925 level to increase the bullish bets into the 1.4017 level next.
USDCAD Technical
Analysis – 4 hour Timeframe
USDCAD 4 hour
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 it to keep
pushing into new highs, while the sellers will look for a break lower to
increase the bearish bets into the 1.3721 support next.
USDCAD Technical
Analysis – 1 hour Timeframe
USDCAD 1 hour
On the 1 hour chart, we can
see that we have a minor downward trendline defining the current pullback. The
sellers will likely continue to lean on the trendline to keep pushing into new
lows, while the buyers will look for a break higher to increase the bullish
bets into new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the US Job Openings data and the US Consumer
Confidence report. Tomorrow, we have the US ADP and the US ISM Manufacturing
PMI. On Thursday, we get the latest US Jobless Claims figures. On Friday, we
conclude the week with the US NFP report and the US ISM Services PMI. Keep also
an eye on Fed speakers.
