As we delve into the financial positions of major currencies, the US dollar isn’t showing much strength against its key competitors, even though we recently encountered some promising Core PCE forecasts following the US CPI and PPI reports, alongside surprisingly robust Retail Sales data. Despite the market initially anticipating more than 80 basis points of rate cuts by year-end amidst heightened risk-off sentiment, current expectations have eased to about 60 basis points. Nevertheless, this hasn’t halted the selling pressure on the dollar. All eyes are now on the upcoming FOMC meeting, with speculation pointing towards stable rates being maintained.
Switching gears to the Canadian front, the Bank of Canada made a move last week, trimming interest rates by 25 basis points, setting them at 2.75%, which aligned with market expectations. This decision comes amid growing concerns over potential sluggish growth driven by trade uncertainties and US tariffs. The central bank has voiced a cautious stance on future policy moves, weighing the inflationary pressures against the backdrop of softer demand.
Governor Macklem expressed acknowledgment of the current economic unpredictability, cautioning that an extended trade standoff might drag down GDP growth, weaken job prospects, and elevate inflationary risks, complicating the monetary policy landscape. As it stands, the probability of no changes in the forthcoming meeting is pegged at 57%, with the market eyeing up to 47 basis points of cuts by year-end.
Turning to the technical landscape of the USDCAD, a glance at the daily chart reveals a chiefly stable range between 1.42 and 1.45, heavily influenced by ongoing tariff debates. The chart at this level offers limited insights, so a closer examination is warranted.
On the 4-hour chart, recent activity has seen prices dip below the crucial 1.4365 mark, enticing sellers to push towards the lower spectrum of the range near 1.4245. Anticipation suggests that buyers might emerge around 1.4245, with defined risk setups below, aiming for a reversal play into the descending trendline.
Zooming in on the 1-hour timeframe, the scenario remains largely unchanged. Buyers appear poised to capitalize on dips around the 1.4245 area, while sellers seem eager to drive a breakout below this level to chase fresh declines. The red lines distinctly outline today’s average daily range.
As we peer into the week ahead, today’s schedule features the Canadian CPI report. Tomorrow, the spotlight shifts to the FOMC Policy Decision, trailed by the release of US Jobless Claims figures on Thursday. Wrapping up the week, Friday rolls out the Canadian Retail Sales data. These events are set to shape market narratives in the coming days.
