FundamentalOverview
The weak US NFP report last Friday triggered risk-off flows.Things got dire on Monday as the Japanese Nikkei dropped 12% overnight and wesaw a general selloff in global stock markets.
At one point, the marketssaw the Fed cutting rates by 136 bps by year-end and some chances of anemergency rate cut. Although the volatility calmed down a bit and marketsrecovered the Monday’s losses, the expectations haven’t changed much as themarket is still pricing a higher probability for a 50 bps cut by the Fed inSeptember and a total of 103 bps by year-end.
The USD gained against thecommodity currencies like the CAD during the risk-off flows but eventually themood in the markets improved and the greenback gave back all the gains. For theBoC, the market is assigning a 95% probability of a 25 bps cut in September anda total of 65 bps of easing by year-end.
USDCAD TechnicalAnalysis – Daily Timeframe
On the daily chart, we cansee that USDCAD spiked above the 1.3860 resistance on Monday due to the global stockmarket rout but eventually gave back all the gains as the mood in the market improved.
The price yesterday fellbelow the key 1.3785 level and the sellers started to pile in with a definedrisk above the level to position for a drop all the way back to the 1.36support. The buyers, on the other hand, will want to see the price rising backabove the 1.3785 level to step back in and increase the bullish bets into newhighs.
USDCAD TechnicalAnalysis – 4 hour Timeframe
On the 1 hour chart, we cansee that we have a downward trendline defining the current bearish momentum. Thebuyers will want to see the price breaking above the trendline and the 1.3785 resistanceto regain control and increase the bullish bets into new highs. The sellers, onthe other hand, will likely keep on leaning on the trendline to keep pushinginto new lows. The red lines define the average daily range for today.
UpcomingCatalysts
This week is basically empty on the data front. The only notable economic releaseswill be on Thursday when we get the latest US Jobless Claims figures and onFriday when we get the Canadian jobs data. The market will also pay closeattention to Fed members’ comments given the latest developments in themarkets.
