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USD/CAD ANLAYSIS & TALKING POINTS

  • BoC meeting minutes suggest less aggressive stance from the central bank.
  • Canadian earnings & retail sales in focus alongside US GDP.
  • Will USD/CAD respect trendline support once again?

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CANADIAN DOLLAR FUNDAMENTAL BACKDROP

The Canadian dollar recovery may be fading after last nights Bank of Canada (BoC) summary of deliberations that highlighted the progress being made on the inflationary front. Despite Tuesday’s marginal beat on both core and headline metrics, there has been no upside shift that is cause for concern at this point. Consequently, we have seen an increase in cumulative interest rate cuts (refer to table below) for 2024 as markets now expect this to be the peak of the cycle for the BoC.

BANK OF CANADA INTEREST RATE PROBABILITIES

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Source: Refinitiv

The economic calendar today holds some important data for Canada including average weekly earnings and retail sales data. Earnings has been sticky and will be welcomed by the BoC should we see a move lower. Retail sales has also been stubborn of recent regardless of restrictive monetary policy and it will be interesting to see how consumer demand has been impacted for October.

From a USD perspective, US GDP , jobless claims and core PCE figures are scheduled later today. GDP is expected to move sharply higher which could stabilize the weakening greenback. The Fed’s Harker yesterday pushed back against cutting rates too early and may well gai traction with other Fed officials.

USD/CAD ECONOMIC CALENDAR (GMT +02:00)

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Source: DailyFX Economic Calendar

TECHNICAL ANALYSIS

USD/CAD DAILY CHART

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Chart prepared by Warren Venketas, IG

Daily USD/CAD price action above has bears testing the long-term trendline support zone (black) which has held firm since June 2021. While the Relative Strength Index (RSI) shows momentum pushing out of oversold territory, a break below trendline support cannot be ruled out. Bulls may be looking for a reversal but should exercise sound risk management as a support break may catalyze a significant drop towards 1.3200 psychological level.

Key resistance levels:

Key support levels:

  • Trendline support
  • 1.3300
  • 1.3200

IG CLIENT SENTIMENT DATA: MIXED

IGCS shows retail traders are currently net LONG on USD/CAD, with 76% of traders currently holding long positions (as of this writing).

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of clients are net long.




of clients are net short.

Change in Longs Shorts OI
Daily -5% -2% -4%
Weekly 44% -16% 18%

Contact and followWarrenon Twitter:@WVenketas

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