FUNDAMENTAL OVERVIEW
USD:
The US dollar has been bouncing around in the past few days as traders continue to wait for the US NFP report. The US data this week has been mixed. We got a soft ISM Manufacturing PMI on Monday but a strong Services PMI yesterday. The ADP was good despite a slight miss, but Job Openings were soft.
In terms of macro, nothing has changed. The market is still pricing 62 bps of easing by year-end with 57% probability of a Fed cut coming in March at the earliest. We will need very soft NFP and CPI data to force the Fed to cut at the upcoming meeting, otherwise traders will just adjust the timing of the expected cuts in 2026 and might even increase bets in the case of weak data.
Tomorrow, the US Supreme Court scheduled an “opinion day”, so we might also potentially get a decision on Trump’s tariffs.
CAD:
On the CAD side, the BoC held interest rates steady at the last policy meeting but didn't validate the market's rate hike bets just yet. In fact, the central bank kept a cautious tone and highlighted the weak details in the last GDP and employment reports despite acknowledging the improvements.
The last Canadian inflation report saw the Trimmed Mean Y/Y falling to 2.8%, 0.1% lower than consensus and 0.2% than the prior month. That led to a slightly dovish repricing in interest rate expectations. Tomorrow, we have the Canadian employment data and that could give the CAD a boost in case we get another strong report.
USDCAD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDCAD squeezed higher in the past couple of weeks with the price now trading near the key 1.39 resistance. This is where we can expect the sellers to step in with a defined risk above the resistance to position for a drop into the 1.3540 level. The buyers, on the other hand, will want to see the price breaking higher to open the door for a rally into the 1.41 handle next.
USDCAD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that we have a strong support zone around the 1.38 handle where the price got rejected from several times in the past month. There’s also an upward trendline adding confluence that should technically strengthen the support zone. If we get a pullback into the support, we can expect the buyers to step in with a defined risk below the trendline to position for a break above the resistance. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the 1.3540 level next.
USDCAD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that we have another minor upward trendline defining the bullish momentum on this timeframe. The buyers will have a better risk to reward setup around the trendline to target new highs, while the sellers will keep on looking for downside breaks to pile in for new lows. 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 US and Canadian labour market reports and potential US Supreme Court decision on Trump’s tariffs.
