Fundamental Overview
The USD came under some pressure on Friday as the risk-off sentiment caused by Trump’s threat of substantially increasing tariffs on China weighed on Treasury yields. Over the weekend, we had more soothing comments from Trump and other US officials which triggered a recovery in risk sentiment.
The positive mood is weighing a bit on the greenback amid lack of bullish catalysts. Domestically, nothing has changed for the US dollar as the US government shutdown continues to delay many key US economic reports. The dollar “repricing trade” needs strong US data to keep going, especially on the labour market side, so any hiccup on that front is likely to keep weighing on the greenback.
The market pricing shifted more dovish with 47 bps of easing by year-end and 115 bps cumulatively by the end of 2026. The BLS announced last week that it will release the US CPI report despite the shutdown on October 24, so that’s going to be a key risk event. In case we get hot data, we will likely see a hawkish repricing in interest rates expectations with the December cut being priced out. Conversely, a soft report shouldn’t change much in terms of pricing, but it will likely weigh on the greenback anyway.
On the CAD side, we got a strong employment report on Friday beating expectations by a big margin although the unemployment rate remained unchanged. The BoC cut interest rates by 25 bps as expected at the last meeting and stressed the need to remain attentive to risks and setting policy on a meeting-by-meeting basis. The probabilities of a cut in October fell to 56% following the employment report but we still have the CPI report before the next meeting.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD reached the key 1.4018 level last week and pulled back. This is where we can expect the sellers to step in with a defined risk above the level to position for a drop into new cycle lows. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 1.43 handle next.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have an upward trendline defining the bullish momentum. The buyers will likely lean on the trendline 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 new lows.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we a support zone around the 1.3975 level. If the price gets there, we can expect the buyers to step in with a defined risk below the support to position for a rally into new highs. The sellers, on the other hand, will look for a break lower to extend the pullback into the trendline. The red lines define the average daily range for today.
Upcoming Catalysts
This week is going to be very light again in terms of data releases given the US government shutdown. Data like Retail Sales and Jobless Claims won’t be released. We will have lots of Fed speakers though with Fed Chair Powell scheduled for tomorrow. Given the lack of key US data though, it’s very unlikely to see a change in stance. For now, we know that only the US CPI will be published despite the shutdown, which is scheduled for Friday October 24.
