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Potential False Break Of USDCAD Bear Trigger

CANADA
  • The Canadian dollar has depreciated amid softer oil prices and a modest increase in UST yields relative to Canadian yields as larger Fed rate hikes become priced in.
  • USD/CAD has retreated off an intra-day high of 1.2698 but still resides +0.3% at 1.2683 having earlier troughed at 1.2610, matching closely to the key touted support level of 1.2608 (Dec 8 low).
  • Today’s price action points to a false break of the bear trigger at 1.2621 (Dec 31 low), signalling a potential bullish development. The focus now turns to resistance which is seen at 1.2748 (20-day EMA) and 1.2814 (Jan 6 high).
  • Interestingly, the latest CFTC net speculative positioning data from Jan 4 showed a small increase in (still relatively low) CAD net bearishness, but it is worth noting that this was prior to Friday’s stellar jobs report.
  • With a fairly light domestic data calendar and no scheduled BOC speakers, immediate sentiment is more likely to be driven by oil and other US factors, particularly with Powell and other Fed members speaking tomorrow and US CPI on Wednesday. For reference Canada CPI will be released on Jan 19 before the BOC rate decision/ statement on Jan 26.
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