FundamentalOverview

The USD has been marginallyweaker recently due to lower than expected US inflation figures last week thatsent Treasury yields lower and made the market to price in higher chances of asecond rate cut by the end of the year.

Yesterday, the greenbackweakened across the board following a WSJ report saying that Trump would lay out thetrade vision but won’t impose tariffs yet. Tonight though, he spoke to themedia and said that he intends to impose 25% tariffs on Canada and Mexico next week.Following the news, the US Dollar erased almost all the losses from the priorday.

On the CAD side, as areminder, the BoC cut interest rates by 50 bps at the last policy meeting but dropped theline saying “if theeconomy evolves broadly in line with our latest forecast, we expect to reducethe policy rate further", which suggests that we reached the peak in"dovishness" and the central bank will now switch to 25 bps cuts andwill slow the pace of easing.

Today, we have the CanadianCPI report which is expected to show some more easing in the underlyinginflation. The market is pricing an 80% chance of a 25 bps cut at the upcomingmeeting and a total of 60 bps of easing by year end.

USDCADTechnical Analysis – Daily Timeframe

On the daily chart, we cansee that USDCAD broke below the major trendline yesterday but eventuallybounced back as Trump talked about 25% tariffs on Canada. The sellers will wantto see the price breaking below the trendline again to gain conviction for newlows, while the buyers will continue to step in around the lows to position forthe rally into the 2020 high around the 1.4670 level.

USDCAD TechnicalAnalysis – 4 hour Timeframe

On the 4 hour chart, we cansee that the pair continues to range between the 1.4300 support and the 1.4470 resistance. The marketparticipants will keep on playing the range until we get a breakout on eitherside.

USDCAD TechnicalAnalysis – 1 hour Timeframe

On the 1 hour chart, there’snot much else we can add here as the buyers will continue to step in around thebottom of the range, while the sellers will pile in around the top. The redlines define the average daily range for today.

UpcomingCatalysts

Today we have the Canadian CPI report. OnThursday, we get the latest US Jobless Claims figures, while on Friday weconclude the week with the Flash US PMIs.