Basic Overview
The US dollar came under further pressure last week as a series of weak US data pushed Treasury yields lower. However, Friday’s non-farm payrolls report was not bad, on the contrary, the data under the hood was better than the previous month. This helped the US dollar erase its weekly losses.
However, the trend in the labor market remains skewed to the downside, and time will tell whether the Fed’s rate cuts will be enough to halt this trend.
The odds of the Fed cutting rates by 50 basis points at its next meeting fell to 27% after the nonfarm payrolls report, with 110 basis points of easing expected by the end of the year. For the Bank of Canada, the market sees a 99% chance of no change at the next meeting and a total of 58 basis points of easing by the end of the year.
USDCAD Technical Analysis – Daily Time Frame
USDCAD Daily
On the daily chart, we can see that the USD/CAD pair is approaching the key resistance level at 1.36. Here we can expect sellers to step in with a defined risk above the resistance level to place a bearish position towards 1.34. On the other hand, buyers will want to see the price rise higher to increase bullish bets towards 1.38 after that.
USDCAD Technical Analysis – 4-hour time frame
USDCAD 4 hours
On the 4-hour chart, we can see that the pair is now trading between two key levels: the support level of 1.34 and the resistance level of 1.36. There is not much we can deduce from this time frame as sellers would be better off relying on the resistance, while buyers would have a stronger confirmation for further upside in case of a break above the resistance.
USDCAD Technical Analysis – 1-Hour Timeframe
USDCAD 1 hour
On the 1-hour chart, we can see that we saw a sharp rally to the downside after the NFP report came out, then a rally after the market digested the better-than-expected details. A break above the recent high at 1.3582 would increase buying pressure towards the resistance area at 1.36.
Buyers will also have the opportunity to buy dips on a drop to the 1.3530 area, while sellers will look for a break below to position themselves on a drop to the 1.34 level. The red lines mark the average daily range for today.
Upcoming incentives
Tomorrow we have the US Small Business Optimism Index. On Wednesday we have the US CPI report. On Thursday we have the latest US jobless claims and US PPI data. On Friday we wrap up the week with the University of Michigan Consumer Confidence report.