Fundamental
Overview
The USD has been on the
backfoot since the beat in the US ISM Services PMI where the data showed that the last
month drop was just a blip and overall we have a resilient economy with lower
inflationary pressures.
The data continues to
reinforce the narrative that the next move is more likely to be a rate cut, and
that inflation is likely to keep coming back to target. This could keep
weighing on the greenback as the positive risk sentiment due to the pickup in
global growth is generally a headwind.
The CAD, on the other hand,
came a bit under pressure this week as the Bank of Canada delivered a slightly more dovish
cut than expected as they signalled that more rate cuts could be on their way
if inflation continues to ease.
Overall, the central bank
said that they remain data dependent and the rate cuts expectations didn’t
change much as the market is seeing 77 bps of easing in total this year vs. 60
bps before the rate decision. The CAD is likely to remain supported though as long as the risk-on sentiment holds.
USDCAD
Technical Analysis – Daily Timeframe
USDCAD Daily
On the daily chart, we can
see that USDCAD spiked into the recent swing high at 1.3740 and erased the move
soon after. Overall, the pair remains confined in the range between the 1.36 support and the 1.3740 resistance. We will likely need
a break on either side to get a more sustained trend. For now, the market
participants might keep on “playing the range” by buying at support and selling
at resistance.
USDCAD Technical
Analysis – 4 hour Timeframe
USDCAD 4 hour
On the 4 hour chart, we can
see more clearly the range with the price now trading right in the middle of
it. From a risk management perspective, the sellers would be better off waiting
for the price to come back to the resistance to position for a drop into the
support. The buyers, on the other hand, will want to wait for the price to come
back into the support to position for a rally into the resistance.
USDCAD Technical
Analysis – 1 hour Timeframe
USDCAD 1 hour
On the 1 hour chart, we can
see that we have a strong support at 1.3666 where the price got rejected from several
times in the past few days. This level should act as kind of a barometer for
the sentiment with the price trading below it being more bearish and above it
being more bullish.
The red lines define the average
daily range for today, so it’s unlikely to see a breakout of the range today
unless the data surprises by a huge margin.
Upcoming
Catalysts
Today we conclude the week with the Canadian Jobs data and the US NFP report.
The US NFP is expected to
show 185K jobs added in May vs. 175K in April,
and the Unemployment Rate remaining unchanged at 3.9%. The Average Hourly Earnings
Y/Y is expected at 3.9% vs. 3.9% prior, while the M/M measure is seen at 0.3%
vs. 0.2% prior.
The Canadian labour market report is expected to show 22.5K jobs added
in May vs. 90.4K in April and the unemployment rate ticking higher to
6.2% vs. 6.1% prior.