FUNDAMENTAL
OVERVIEW
USD:
The US dollar continues to
bounce around as macro and geopolitical uncertainty is keeping the market
rangebound. The greenback strengthened yesterday after early reports suggested
the third round of US–Iran talks had broken down, with Iran reportedly
rejecting US demands. Later in the day, however, new headlines indicated that
the discussions had actually made significant progress and that another round was
scheduled for next week. The USD eventually gave back the gains.
The potential US-Iran
military escalation and the future Fed’s interest rates path remain the biggest
risks for the US dollar. A military escalation will likely boost the greenback
on severe risk-off mood. A hawkish repricing of interest rate expectations on
stronger US data would also have a positive effect on the USD. Fed’s Waller
placed a great deal on next week’s NFP report.
CAD:
On the CAD side, nothing
has changed as the BoC remains in neutral mode and traders await new
developments on the USMCA review front.
Yesterday, Dominic LeBlanc,
who is the Canadian minister responsible for US-Canada trade, said that private
government to government conversations on USMCA are “not
discouraging”. Regarding separate bi-lateral deals, he said there have
always been bilateral arrangements between the three countries.
The signals have been
mixed, but overall, slightly positive. The market is pricing some chances of a
rate cut by year-end but those remain low. The economic data has been
supportive of such stance with the labour market stabilising and core inflation
hovering a bit above the 2.5% mid-point of the BoC 2-3% target range.
USDCAD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDCAD pulled all the way back to the monthly high around the 1.3725
level and stalled as the market got stuck in a consolidation. We can expect the
sellers to lean on the 1.3725 resistance and the major downward trendline to
position for a drop into new lows. The buyers, on the other hand, will look for
a upside breakouts to increase the bullish bets into the 1.3900 handle next.
USDCAD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see the recent price action formed a potential head and shoulders pattern near
the monthly high with the neckline standing around the 1.3650 level. The buyers
will likely continue to step in around the neckline 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 1.3500 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 have a better risk to reward setup around
the neckline, while the sellers will either wait for a break below the neckline
or above the resistance. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we conclude the week with the Canadian GDP and the US PPI data but
continue to watch out for US-Iran headlines ahead of the weekend.
This article was written by Giuseppe Dellamotta at investinglive.com.