Fundamental Overview
The USD weakened across the board yesterday following soft ADP data and a Bloomberg report saying that Hassett emerged as the frontrunner for the Fed Chair position.
The greenback was already under some pressure caused by Fed’s Williams endorsement for a December cut on Friday. The probability for a December cut is now at 76%, which generally makes it a done deal.
We won’t get much data before the FOMC meeting, so the focus will likely be mainly on jobless claims and ADP data. Weak data should keep weighing on the greenback, while strong data could provide some short-term support. At the end of the day though, it’s all about the FOMC decision and the following NFP and CPI reports.
On the CAD side, the BoC cut interest rates by 25 bps at the last meeting as expected bringing the policy rate to the lower bound of their estimated neutral rate range of 2.25%-3.25%. The central bank has also signalled that they reached the end of their cutting cycle, although they kept the door open for another cut if needed.
The recent data gave the BoC all the reasons to remain on the sidelines as we got another strong Canadian employment report and the inflation data showed the Trimmed Mean CPI Y/Y remaining around 3%.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD bounced near the upward trendline and extended the gains into the recent highs. If we were to get another pullback, we can expect the buyers to lean on the trendline with a defined risk below it to keep pushing into new highs. The sellers, on the other hand, will want to see the price breaking lower to extend the drop into the 1.3887 level.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor support zone around the 1.4060 level. The buyers will likely continue to step in there with a defined risk below it to keep targeting a rally into the recent highs. The sellers, on the other hand, will look for a break lower to pile in for a drop into the major trendline.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward trendline defining the recent pullback. The sellers will likely continue to lean on the trendline to keep pushing into new lows, while the buyers will look for a break higher to increase the bullish bets into the 1.4130 resistance. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures. Tomorrow, we have the US Thanksgiving holiday which is likely to make the final part of the week more rangebound. Finally, on Friday we conclude the week with the Canadian GDP report.
