USDCAD TECHS: Trades Above Trendline Resistance
- RES 4: 1.3862 High Mar 10 and a key resistance
- RES 3: 1.3835 2.0% 10-dma envelope
- RES 2: 1.3805 High Mar 24
- RES 1: 1.3780 High Oct 4
- PRICE: 1.3752 @ 16:29 BST Oct 4
- SUP 1: 1.3548 20-day EMA
- SUP 2: 1.3497 50-day EMA
- SUP 3: 1.3417 Low Sep 29
- SUP 4: 1.3381 Low Sep 19 and a key support
USDCAD trades higher again Wednesday. The pair has this week breached key short-term resistance at 1.3695, the Sep 7 high. This highlights a bullish theme and reverses the recent bearish phase. The break confirms a resumption of the uptrend that started mid-July. Trendline resistance - at 1.3701 and drawn from the Oct 13 ‘22 high - has also been pierced. A clear trendline break would be bullish. Support is at 1.3548, the 20-day EMA.
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USDCAD TECHS: Trend Needle Points North
- RES 4: 1.3805 High Mar 24
- RES 3: 1.3727 Trendline resistance drawn from the Oct 13 2022 high
- RES 2: 1.3655 High May 26 and a key resistance
- RES 1: 1.3640 High Aug 25
- PRICE: 1.3601 @ 15:55 BST Sep 4
- SUP 1: 1.3490 Low Sep 1
- SUP 2: 1.3420 50-day EMA
- SUP 3: 1.3352 Low Aug 7
- SUP 4: 1.3266 Low Aug 2
USDCAD bounced sharply into the Friday close and a key short-term support has been defined at 1.3490, that day’s low. The trend outlook remains bullish and the focus is on 1.3655, May 26 high. A trendline resistance, drawn from the Oct 13 2022 high, is at 1.3725 and represents an objective further out. On the downside, a clear break of 1.3490 would signal scope for a deeper correction. This would expose 1.3420, the 50-day EMA.
CANADA: ING: The BoC Should Feel It’s Done Enough To Bring Inflation Back To Target
- The BoC is widely expected to leave the policy interest rate at 5% on 6 September.
- With growth cooling in the second quarter and the unemployment rate ticking higher, ING suspect that the BoC will feel it has done enough, after implementing 425bp of interest rate increases, to bring inflation back to target in the medium term even though CPI did pick up a touch last month.
- According to the latest Bloomberg survey, just three of 32 analysts questioned felt the bank would raise rates by 25bp with everyone else looking for no change. Overnight index swaps are pricing only around a 15% chance of a hike.
CANADA: CIBC: GDP Tipped Scales Away From Sept Hike, BoC Should Be Done For The Cycle
- CIBC note that they had expressed doubts about the need for July’s rate hike when it was announced. Those doubts were borne out in Friday's lacklustre GDP data, particularly since the monthly GDP trend isn’t encouraging for Q3.
- The BoC’s impatience in July had us believing that it would carry on with yet another intemperate hike in September. But data in the past week has tipped the scales enough that we expect the BoC to do the right thing, and opt to pause next week.
- As in the US, don’t expect Gov. Macklem to formally declare that rates have definitely peaked. He’ll need to see more disinflationary momentum for that, and it could be some months before we’ll have enough labour market slack for the Bank to be comfortable in stating that rates are high enough to do the job.
- But if they skip a hike in September, we expect that the balance of risk calculation will ultimately clarify that rates have in fact peaked for this cycle.
