Fundamental
Overview
The USD yesterday weakened
across the board on the Fed’s decision but eventually erased all the losses and
increased the gains as traders digested all the information and realised it was
more hawkish compared to market pricing.
In fact, the dot plot
showed that the FOMC projected two more rate cuts for 2025 by a narrow
majority, with the rest of officials expecting just one more or even none.
Moreover, the Fed projected just one cut in 2026 compared to three that the
market was pricing before the decision.
Fed Chair Powell then
labelled the rate cut as a “risk management” action given the weakening in the
labour market data. But overall, he sounded pretty neutral even though he
understandably placed more emphasis on the labour market given the two consecutive
soft NFP reports.
Looking forward, it’s going
to be all about the data. Strong data will likely trigger a hawkish repricing
in interest rates expectations and support the greenback. On the other hand,
weak data will likely continue to weigh on it.
On the CAD side, the BoC
cut interest rates by 25 bps as expected 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 pricing remained largely unchanged with 19 bps of easing
priced in by year-end and 60% probability of no change at the upcoming meeting
in October.
USDCAD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDCAD dropped all the way back to the 1.3720 level. This support
could also be the neckline of the head and shoulders pattern formed at the 1.3862
resistance. The buyers will likely
continue to step in around the support with a defined risk below it to position
for a rally into the 1.40 handle. The sellers, on the other hand, will want to
see the price breaking lower to increase the bearish bets into the 1.3540 low next.
USDCAD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a minor downward trendline
defining the bearish momentum. The sellers stepped in around the trendline with
a defined risk above it to target a break below the neckline. The buyers, on
the other hand, will want to see the price breaking higher to increase the
bullish bets into the 1.3862 resistance next.
USDCAD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have a minor support zone around the 1.3765 level. This is where we
can expect the buyers to step in with a defined risk below the support to
position for a rally into the 1.3862 resistance. The sellers, on the other hand,
will look for a break lower to increase the bearish bets into the 1.3720
support targeting a breakout. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures.
Tomorrow, we conclude the week with the Canadian retail sales data.
This article was written by Giuseppe Dellamotta at investinglive.com.