Upside Risks for USD

USDCAD looks interesting to the topside today. The pair has been on a steady move higher over recent days while the retail market has built up a heavy 85% short position. The big event to watch today is of course the advance US GDP release due later this afternoon. With a low bar set for the data (2%), there are upside risks for USD should we see any surprise strength. Given the proximity to next week’s FOMC meeting and the fact that the market is still not entirely convinced of a hike, an upside beta today would likely see USD move higher as the market moves to fully price in a rate increase.

CAD Under Pressure

With the BOC committed to keeping rates on hold for now, any uptick in hawkish Fed expectations should drive USDCAD higher near-term. Additionally, the heavy sell off in crude prices over the last week is having a dampening impact on CAD. With oil prices at risk of further losses near term, this is adding to the current backdrop supporting continued strength in USDCAD.

Technical Views

USDCAD

The rally in USDCAD off the bear channel lows has seen the market breaking above the 1.3501 level resistance. Price is currently stalled into a test of the channel top, ahead of structural resistance at the 1.3683 level. While momentum studies are flat for now, the heavy retail skew suggests room for a further push higher and a breakout towards the 1.3839 level next.