Fundamental
Overview

The USD came back with a
vengeance last Friday following the strong US NFP report where the data surprised with solid job
and wage growth. There were also negatives like the uptick in the unemployment
rate, but all in all, we can say that it was a good report.

The data triggered a
hawkish repricing in interest rates expectations with the market now expecting
once again just one cut by the end of the year. It’s not a big deal in the
bigger picture, but for now the sentiment is bullish for the greenback and we will
likely need a catalyst to change it again.

The CAD, on the other hand,
was already a bit under pressure as the Bank of Canada delivered a slightly more dovish
cut than expected. Overall, the central bank said that they remain data
dependent and the rate cuts expectations didn’t change much.

If we go back into risk-on
sentiment, the greenback could start to lose ground against the major
currencies again, so the US CPI report tomorrow will be key as the recent breakout
could be invalidated in case we get soft data.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD broke out of the recent range as it breached the 1.3740 resistance
following the US NFP release. The target for the buyers remains the 1.3860
level and we can expect them to pile in around the recent resistance
now turned support.

The sellers, on the other
hand, will want to see the price falling back below the 1.3740 zone to
invalidate the bullish bias and start looking for a drop back into the 1.36
support.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the breakout and the support now around the 1.3740 level where
we can also find the 38.2% Fibonacci
retracement level for confluence.

This is where we can expect
the buyers to step in with a defined risk below the support to position for a
rally into the 1.3860 level with a better risk to reward setup. The sellers, on
the other hand, will want to see the price breaking lower to position for a
drop back into the 1.36 support.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a trendline
around the 1.3720 level which is going to be the last line of defence for the
buyers in case the price dips below the support. The red lines define the average
daily range for today.

Upcoming
Catalysts

This week is a bit empty on the data front although we will
have the biggest market moving events tomorrow when we get the US CPI data and
the FOMC rate decision. On Thursday, we have the US PPI and the latest US
Jobless Claims figures. On Friday, we conclude the week with the University of
Michigan Consumer Sentiment survey.