USDCAD TECHS: Trend Needle Points South

• RES 4: 165.43 High Nov 8        
• RES 3: 164.90 High Dec 30 ‘24 and a key medium-term resistance   
• RES 2: 164.55 High Jan 7
• RES 1: 164.19 High Mar 18
• PRICE: 163.46 @ 16:38 GMT Mar 18 
• SUP 1: 161.50 Low Mar 17  
• SUP 2: 159.96 50-day EMA 
• SUP 3: 158.90 Low Mar 10  
• SUP 4: 158.00 Round number support 

A bull cycle in EURJPY remains in play and this week’s extension and positive start to the week, reinforces current conditions. The contract again traded higher Tuesday and cleared resistance at 164.08, the Jan 24 high. This strengthens the bullish condition and opens 164.90, the Dec 30 ‘24 high. The bull cycle is overbought, a pullback would allow this condition to unwind. Firm support lies at 159.96, the 50-day EMA.    

2026-27: 2026 is also likely to maintain its implied 2 cut dot of 3.4%, though there are salient two-way risks here: just 5 participants in December saw that level of year-end rates, with 7 above and 7 below. The risks here lean hawkish and it’s possible 3 dots move above 3.4% to raise the median to 3.6% (one cut), but this isn’t MNI’s base case. However, as with 2025’s, the lower dots (3x between 2.4% and 2.9%) could shift higher, and it’s possible there is a slight rise in the number of dots at the high end (3.9%), with potential for the top participant’s dot to exceed that. 

• For 2027, most participants appear to simply consider this an extension of the longer-run dot, with 7 of 19 participants at the median 3.1% last time, just above the 3.0% longer-run dot. While the latter may shift up (see below) due to upward movements in a few dots, the distribution for 2027 would require far more participants to shift their view from the last meeting to move the median (there were 12 participants at 3.1% or below).

Longer-Run: The longer-run dot median has shifted up in each quarterly projection so far since the start of 2024, to 2.625% in March, to 2.75% in June, to 2.875% in September, and to 3.00% in December. An increase in the median to 3.125% in March would thus be in keeping with the trend and we tentatively pencil it in.

• At last count in December, there were 8 dots below 3.00%, 3 at 3.00%, and 8 above. So to move the median to 3.125%, it would require 2 of the 11 dots to move from 3.00% or below to move to 3.125% or above. That’s a slightly higher bar than at the prior meeting (only 1 dot shift was required), but certainly surmountable, and the chances are probably 50/50.
• Such an increase would bring it back above 3.00% for the first time since March 2016, and would be up from the trough of 2.40% in 2022. 

2025: The 2025 end-year rate median is likely to remain unchanged in March from December’s projection of 3.9%, representing two 25bp cuts this year. Our expectation for the dots is below.

• The 10 participants (of 19 total on the FOMC) who pencilled in that rate in December probably included the leadership of the Committee including Chair Powell, which usually holds sway over the median.
• We could see a drift higher in the distribution for multiple reasons. Firstly, the upper end of the distribution is likely to be cemented, with probably 3 or 4 participants eyeing a year-long hold, perhaps joined by 1 or 2 looking for just one cut this year. (One intrigue will be if one of the hawks pencils in a rate hike, though that looks unlikely and hasn’t been mentioned as a base case by any participant.)
• Secondly, the bottom end of the distribution will drift up: the two bottom dots at 3.4% (100bp of cuts) and 3.1% (125bp of cuts) will probably move to 3.6% (75bp of cuts), given what we’ve heard from FOMC participants so far this year (even Gov Waller, a dove, notes potential for just two or perhaps three cuts). One or two of December’s three 3x cutters could drift higher to the 2x cut slot.
• That will leave a still-solid 12-14 participants looking for 2-3 cuts this year.