Basic Overview
Finally, the US dollar got some respite from last week after suffering for weeks. The focus now turns to the key data this week with the ISM Manufacturing PMI due today and the Non-Farm Payrolls report due on Friday.
The market is awaiting key economic data this week, particularly the non-farm payrolls report, as that will likely decide whether the Fed will make a record 25 basis point cut or go for a more aggressive 50 basis point cut at its next meeting.
At the moment, it looks like the Fed will cut interest rates to support the resilient economy, which has been a positive driver for risk sentiment, but if the data deteriorates further, it could spark recession fears.
Therefore, in addition to today’s headline ISM figure, the employment sub-index should also be watched as a drop to new lows could unsettle markets while an improvement could lead to positive sentiment.
Tomorrow we also have the Bank of Canada interest rate decision, with the central bank expected to cut rates by 25 basis points. The latest CPI report showed further easing in core inflation measures and labour market data was somewhat weak.
Overall, it doesn’t look like the central bank is going to cut rates by 50 basis points, but it can’t be ruled out entirely. Including the September cut, the market is expecting a 75 basis point rate cut 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 has bounced near the 1.34 level after an incredible bearish wave. From a risk-to-reward perspective, sellers will have a better setup around the 1.36 level where they will find strong resistance that they can rely on to take the price down to the 1.32 level. On the other hand, buyers will want to see the price break the 1.36 resistance level to regain control and move towards the 1.38 level.
USDCAD Technical Analysis – 4-hour time frame
USDCAD 4 hours
On the 4-hour chart, we can see that we have a slight rising trend line that defines the current bullish momentum. Buyers are likely to continue relying on it to target the 1.36 resistance level, while sellers want to see the price drop to increase bearish bets to the 1.34 level.
USDCAD Technical Analysis – 1-Hour Timeframe
USDCAD 1 hour
On the 1-hour chart, we can see the recent price action with some higher highs and higher lows on this time frame. At the moment, buyers remain in control and sellers will need the price to break below the trend line to change the bias to bearish again. The red lines mark the average daily range for today.
Upcoming incentives
Today we have the US ISM Manufacturing PMI. Tomorrow we have the Bank of Canada interest rate decision and US job openings. On Thursday we get the US jobless claims and ISM services PMI. Finally, on Friday we wrap up the week with the Canadian labour market report and US nonfarm payrolls data.