USDCAD TECHS: Strong Sell-Off Exposes Support

• 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 and a bull trigger 
• PRICE: 1.3824 @ 16:43 BST Aug 18
• SUP 1: 1.3722 Low Aug 22
• SUP 2: 1.3576 Low Jul 23 
• SUP 3: 1.3557/40 Low Jul 3 / Low Jun 16 and the bear trigger
• SUP 4: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing

USDCAD remains subdued, despite the recent shallow recovery. Attention is on support around the 20-day EMA, at 1.3758. A clear break of this EMA would resume the correction off the early August high at 1.3879. This would expose 1.3576, the Jul 23 low. Key medium-term support and the bear trigger lies at 1.3540, the Jun 16 low. For bulls, a break of 1.3879, the Aug 1 high, would cancel a bear threat and resume the recent bull cycle.

Continuing in order of higher-to-lower headline CPI Y/Y forecasts:

• National: "Although gasoline prices fell during the month, this may not have been enough to prevent a 0.4% monthly increase in the overall index (not seasonally adjusted). If this scenario materializes, the annual inflation rate could ease by one-tenth of a percentage point, reaching 1.8%. Looking at the Bank of Canada's core measures, the CPI-med may have remained stable at 3.1% on an annual basis, while the CPI-trim may have risen from 3.0% to 3.1%."
• Goldman Sachs: "First, we expect non-core goods to exert downward pressure on headline inflation. Second, we continue to expect a gradual passthrough of tariffs to consumer goods prices, and forecast a 3bp boost this month. Lastly, we expect shelter inflation to moderate in July, driven largely by softer rent inflation...we continue to expect a 0.3-0.4pp boost to headline CPI from tariffs over the course of the year. "
• CIBC: "Inflationary pressures likely eased slightly in July, which would bring us a step closer to the Bank of Canada restarting interest rate cuts. Gasoline prices were down marginally on the month... However, policymakers will be more focused on core measures of inflation, which should rise by a modest 0.2% seasonally, adjusted thanks to weaker upward pressure from shelter prices. While year-over-year rates for CPI-trim, median and CPI-X could accelerate slightly due to base effects, the 3-month annualized rates will fall back below 3% if monthly increases are a modest 0.2% as we expect...While core measures of inflation will remain a little high for the Bank of Canada’s liking on a year-over-year basis, early indications that the trend is easing again alongside a weakening economy will keep the door open to a September interest rate cut."
• TD: "Seasonal tailwinds to airfares and travel services will serve as the main catalyst for the m/m increase, while the ongoing thaw in shelter costs provides a driver for deceleration on a year-ago basis. Signs of stabilization across the BoC's preferred core inflation measures should add a dovish element to the report, with CPI-trim/median projected to hold at 3.0%/3.1% despite a relatively soft 0.14% m/m increase, which would translate to a sharp deceleration on a 3m annualized basis. Core inflation will provide the most important signal for the near-term policy outlook, even if the Bank does not place too much weight on any individual measure amid the broader focus on underlying inflation. Still, softer core inflation momentum should give the Bank more evidence of contained cost pressures and keep the path to a September rate cut intact."
• Desjardins: "We expect lower energy prices during the month to have partially offset our forecast for a moderate rise in prices excluding food and energy. The jury is still out on whether companies will pass on tariff-related costs to consumers. Core goods prices have risen, suggesting some passthrough, but most of the increase has been concentrated in automobile prices. For July, we’ll be looking to see if those price increases continued or broadened out. Services inflation likely continued to moderate as shelter prices normalized further. While the Bank of Canada’s core measures of inflation probably drifted slightly higher, most of that increase is due to inflation readings earlier in the year. We expect the three-month annualized rates of the Bank of Canada’s core measures to have fallen notably in July."

• Still weaker after the bell, Treasury futures are off late morning lows, curves mildly steeper (2s10s +0.281 at 56.614; 5s30s +.479 at 108.512) while projected rate cut pricing retreats slightly vs. early morning levels (*): Sep'25 at -20.9bp (-21.2bp), Oct'25 at -33.6bp (-34.6bp), Dec'25 at -52.9bp (-54.6bp), Jan'26 at -64.1bp (-65.6bp).
• Tsy Sep'25 10Y contract trades -1.5 at 111-17.5 (111-13.5L / 111-27H), volume just over 1.1M -- a fair portion of which driven by Sep/Dec quarterly roll. Key support is 110-08+, the low on Jul 15 and 16. Prices faded into the Monday close, however first support is yet to be tested at 110-23+, the Aug 1 low.
• Limited data: August's NAHB/Wells Fargo Housing Market report showed little improvement in the homebuilding sector, with present sales weakening modestly and selling prospects steady/moderately better. The headline index fell 1 point to 32 - reverting back to June's level which is around post-2022 lows.
• The NY Fed's survey of regional services firms' business leaders showed a deterioration in activity and forward-looking sentiment in August, with inflation pressures remaining prevalent. The current general activity index fell for the first time since March, to -11.7 from -9.3 prior
• Cross asset: stocks flat to mildly weaker (SPX eminis -0.75 at 6470.75; DJIA -30.02 at 44916.1, Nasdaq +4.96 at 21627.75), crude firmer (WTI +.53 at 63.33), Gold weaker (-3.94 at 3332.25). USD index now 0.3% higher on the session as we approach the APAC crossover. Although there has been a flurry of initial headlines from the Trump/Zelenskyy meeting at the White House, few concrete details have been provided regarding the war.