USDCAD TECHS: Outlook Remains Bullish

• RES 4: 1.4111 High Apr 10  
• RES 3: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg 
• RES 2: 1.3920 High May 21
• RES 1: 1.3879 High Aug 1
• PRICE: 1.3761 @ 16:01 BST Aug 13
• SUP 1: 1.3557 Low Jul 03
• SUP 2: 1.3540 Low Jun 16 and the bear trigger
• SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
• SUP 4: 1.3473 Low Oct 2 2024

USDCAD remains subdued, despite the shallow bounce Friday feeding through to further gains on Monday. The reversal off highs on Tuesday affirms this theme. The pair remains notably lower on the week on the back of last Friday’s USD weakness. Initial firm support has been breached at the 1.3737 20-day EMA, a break below which would resume the correction off the early August high at 1.3879. On the recent run higher, price traded through the 50-day EMA at 1.3746, which aided the rally. This week’s price action, however, has cancelled that bullish threat and returned focus lower. The 100-dma becomes a key pivot point at 1.3814 last. 

The belly outperformed on the Treasury curve Wednesday as Fed easing prospects incrementally increased.

• The space early was buoyed in early New York trade after Treasury Secretary Bessent said the Fed should consider a 50bp cut next month, and 150-175bp of easing overall.
• Later in the session, the front end of the futures strip reacted favorably to commentary by FOMC's Bostic (view of only one 2025 cut predicated on labor market remaining solid ) Goolsbee (September meeting will be "live").
• This saw a September cut become more than fully priced, with the futures-implied Fed funds rate for that meeting (4.07%) at the lowest since the first days of July.
• Also helping was a modest pullback in implied breakeven inflation, as oil prices remained under pressure ahead of the Trump/Putin talks on Friday.
• Against this backdrop, yields across the curve dropped the most since Aug 1. 5s30s neared the steepest close since October 2021 (which was set Friday at 106.32bp).
• Thursday's data includes weekly jobless claims and PPI, eyed for both price pressures in their own right and helping hone July PCE estimates (after the CPI data, MNI's survey of estimates points to 0.25% M/M for core PCE). Fed speakers include Musalem and Barkin.
• Latest levels: the 2-Yr yield is down 5.2bps at 3.6786%, 5-Yr is down 5.8bps at 3.765%, 10-Yr is down 5.2bps at 4.2365%, and 30-Yr is down 5.1bps at 4.8273%. Sep 10-Yr futures (TY) up 11.5/32  at 112-5.5 (L: 111-23 / H: 112-09)

• The greenback again traded weaker, making for a second session of losses for the USD Index. Key support into the early August low at 97.945 has given way, opening 97.109 in the short-term ahead of the bear trigger at 96.377. USD weakness came alongside further reports around the leadership and make-up of the Fed into next year. Treasury Secretary Bessent spoke on the interview process, and stated that if the Fed had effective leadership the key rate would be as much as 175bps lower now than it would have been otherwise - further affirming the administration's preference for a low-rates Fed chair once Powell departs next year.
• The list of candidates grew further according to reports, with a number of private sector economists added to the list of those considered, on top of the well known names of Hassett, Warsh, Waller and Bowman.
• GBP rallied further, extending the recent spell of strength and further building on the gains posted after the break of the 50-day EMA on the August BoE rate decision. This firms the speed of the recovery off the 1.3142 pullback low and signals a greater probability of a bullish reversal. For now, S/T momentum is still pointed higher, with the Jul 24 high of 1.3589 the next notable upside level.
• Meanwhile, speculation around the Trump-Putin meeting in Alaska at the end of the week continues to build. Following a call with European leaders today, it was disclosed that Trump is set to pursue an immediate ceasefire in the conflict - at which point more sincere negotiations and talks can begin over a conclusion to the war. Territory remains the key issue, with Kyiv ruling out the handing over of eastern territories, and Putin requiring some concessions as a result of his multi-year special operation. Oil and risk markets remain sensitive to the issue, with Trump warning of "very severe consequences" if no interim agreement is reached on Friday.
• Australia jobs data is the highlight Thursday. With May and June employment gains disappointing, the July data will be monitored closely for signs that the labour market has turned. Q2 employment averaged 28.8k/month up from Q1's 1.4k but slightly lower than Q2 2024's 32.2k. Consensus expects a 25k gain in July after June's +2k, slightly below the Q2 average. The unemployment rate is forecast to decline 0.1pp to 4.2%, returning to the Q2 average.