FUNDAMENTAL
OVERVIEW

USD:

The US dollar skyrocketed
in the final part of last week as prospects of a quick end to the war faded and
oil resumed the rally towards triple digit levels. Traders continue to price
out the rate cut bets amid surging energy prices.

On Wednesday, we have the
FOMC policy decision where the central bank is expected to keep interest rates
unchanged with Miran, Waller and Bowman likely dissenting in favour of a rate
cut. At this meeting, we will also get the Summary of Economic Projections and
the Dot Plot.

The Fed is likely to revise
growth forecasts lower, while upgrading inflation estimates. The median Dot
Plot should remain unchanged with one rate cut expected by year-end. Overall,
the central bank is likely to stress patience amid the US-Iran war but maintain
an easing bias.

CAD:

On the CAD side, the
economic data has been surprising to the downside, and last Friday we got a
very weak jobs
report. In such a case, we would see traders pricing in rate cuts for the
BoC but given the US-Iran war and the surging energy prices, the market is
expecting almost two rate hikes by the end of the year.

On Wednesday, we have the Bank
of Canada policy decision where the central bank is expected to keep interest
rates unchanged amid the geopolitical uncertainty. The BoC might dismiss market-based
interest rates expectations given the risks to growth though, which could weigh
on the CAD.

Today, we get the Canadian
CPI report. As usual, the focus will be mainly on the Trimmed Mean CPI Y/Y
which is expected at 2.3% vs 2.4% prior. The data might not change much for the
market given the focus on the US-Iran war.

USDCAD TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily chart, we can
see that USDCAD has
been trading in a wide range since February and the price recently surged all
the way back to the resistance around the 1.3750 level. This is where we can
expect the sellers to step in with a defined risk above the resistance to
position for a drop back into the 1.3550 support. The buyers, on the other
hand, will look for a breakout to increase the bullish bets into the 1.39
handle next.

USDCAD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour chart, we have
a mid-range support around the 1.3630 level. That should be the first target
for the sellers. If the price gets there, we can expect the buyers to step in
with a defined risk below the support to position for a rally back into the
1.3750 resistance next.

USDCAD TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour chart, we can
see the price is breaking below the upward trendline that was defining the
bullish momentum on this timeframe. From a risk management perspective, the sellers
would have a better risk to reward setup around the downward counter-trendline
to keep targeting the 1.3630 support. The buyers, on the other hand, will want
to see the price breaking above the counter-trendline to position for a
breakout above the 1.3750 resistance next. The red lines define the average daily range for today.

UPCOMING CATALYSTS

Today we get the Canadian CPI report. On Wednesday, we have the BoC policy
decision, the US PPI report and the FOMC policy decision. On Thursday, we get
the latest US Jobless Claims figures. The focus remains on the US-Iran war, so
keep an eye on the headlines, especially those regarding the Strait of Hormuz.