FundamentalOverview

The main culprit for the USDollar strength lately has been the rally in long term Treasury yields. Theyield curve has been bear-flattening which is what you would expect with highergrowth and potentially higher inflation expectations.

There’s a good argumentthat the markets have been already positioning for a Trump’s victory which isexpected to strengthen the higher growth and less rate cuts expectations.

As previously mentioned,this is the trend for now and it’s generally a bad idea to fight such trendswithout a strong catalyst. The US Dollar will likely remain supported unlessHarris wins the US elections and we get a correction in Treasury yields.

On the CAD side, the BoC cut interest rates by 50 bps as expected recently andsignalled more rate cuts to come with the size of the cuts being guided byincoming data. The market sees a 90% probability of a 25 bps cut in December (10%for a 50 bps cut) and then three more 25 bps cuts in 2025.

USDCADTechnical Analysis – Daily Timeframe

On the daily chart, we cansee that USDCAD extended the rally into the 1.39 handle as it continues toapproach the 2-year high at 1.3977. At this point the market might need to seethe US election result to break the 2-year high but the momentum is stillfavourable for the greenback.

USDCAD TechnicalAnalysis – 4 hour Timeframe

On the 4 hour chart, we cansee that we have a minor upward trendline defining the current bullish momentum.The buyers will likely lean on it to position for a rally into a new high,while the sellers will look for a break lower to start targeting the 1.38handle.

USDCAD TechnicalAnalysis – 1 hour Timeframe

On the 1 hour chart, we cansee that we now have a counter-trendline defining the current pullback. Thebuyers will want to see the price breaking higher to increase the bullish betsinto new highs, while the sellers will likely lean on to ride the pullback intothe major trendline. The red lines define the average daily range for today.

UpcomingCatalysts

Today we have the US Job Openings and the US Consumer Confidence report.Tomorrow, we get the US ADP and the US GDP. On Thursday, we have the US PCE,the US Jobless Claims, the US Employment Cost Index and the Canadian GDP data.Finally, on Friday, we conclude the week with the US NFP and the US ISMManufacturing PMI.