USD/CAD is up 2.08% in 20 days as the Fed hikes and the BoC holds at 2.25%, widening the rate gap in the dollar's favour even with Brent near $106. TNFX Research expects dips toward 1.41246 to be bought, with a retest of 1.42475 into the 28 Oct BoC and FOMC decisions.
This week: Overbought, so a dip toward 1.41246 may come first; buyers then target 1.42252 (weekly R1). NFP on 2 Oct is the swing factor.
End of October: Base case: end October near 1.42475. A daily close below 1.40721 would void the bullish call.
Key levels
Resistance
- R11.42009
- R21.42252
- R31.42475
Support
- S11.41246
- S21.40721
- S31.40017
Scenarios
- Trigger
- Payrolls above +180k or CPI above August's 3.4%
- Target
- 1.43438
A break of 1.42475 extends toward 1.43438 (last + 3x ATR).
- Trigger
- US data hold up; a 28 Oct Fed hike stays priced while the BoC holds
- Target
- 1.42475
Dips are bought above 1.41246 and the pair retests the 1.42475 period high.
- Trigger
- Weak payrolls cut Fed hike odds and the overbought RSI unwinds
- Target
- 1.40017
Loss of 1.40721 sends the pair back to the 1.40017 swing low.
What drives it
- Fed 3.75-4.00% vs BoC 2.25%: rate gap widening
- ~70-77% odds of a Fed hike on 28 Oct, same day as BoC
- US 10-year above 5.2% outweighs Brent near $106
- Six straight higher daily closes; RSI 75.4 overbought
Dates to watch
US jobs report (NFP), 15:30 MeccaThe only payrolls report before the FOMC; a strong print extends the dollar's rate edge.
US CPI (September)August CPI was 3.4% y/y with energy +16.3%; a hot print lifts October hike odds.
BoC decisionA hold at 2.25% keeps the Fed-BoC gap wide; a hike would narrow it and weigh on USD/CAD.
FOMC decisionA second 25bp hike is priced at ~70-77%; delivery supports the bullish base case.
Technical picture
Well above SMA20 (1.39578) and SMA50 (1.39515) after six straight higher daily closes, with today up again. RSI 75.4 is overbought, raising short-term pullback risk. ATR14 0.00533 (0.38%).
What would change our view
A daily close below 1.40721 (weekly S1), for example after weak US payrolls or a BoC hike on 28 Oct, would signal the rally is over.