Next week is anticipated to be relatively calm, although there are several significant economic events that warrant attention.

The week kicks off on Monday with two key events for the United States: the release of the ISM Services PMI data and the factory orders month-on-month (m/m) report. On Tuesday, all eyes will be on the RBA as they announce their decision on the cash rate and release the rate statement. RBA Governor Philip Lowe is scheduled to deliver a speech Wednesday at the Morgan Stanley Australia Summit in Sydney. This event might involve questions from the audience. Additionally, the GDP

quarter-on-quarter (q/q) data for Australia will be published the same day.

For Canada, Wednesday brings the BoC rate statement, along with the announcement of the overnight rate. Thursday will see the final release of the GDP q/q data for Japan, which will provide a comprehensive assessment of the country's economic performance in the last quarter. In the United States, the focus will be on the weekly unemployment claims report.

Lastly, on Friday, Canada will release the employment change data and the unemployment rate, offering insights into the overall labor market conditions in the country.

The ISM Services Index printed above 50 in the past four months following a contraction period registered last year. For this week's data the consensus is for 52.6, which suggests that the services sector remains resilient to the economic headwinds. On the other hand, the outlook for the ISM manufacturing index is not as positive with the index contracting further in May, a trend seen for the past 7 months in a row.

At this week's RBA meeting the expectation is for the bank to maintain rates on hold. As a reminder, the RBA surprised the market last month with a rate hike even though inflation showed signs of cooling down. ING analysts think the Bank might hike again by 25bps this week, but others believe it's more likely the bank will wait until August for the quarter CPI data to come in, which seems to now weigh more than the monthly data in its decisions. Analysts from Citi expect two more hikes this year, in July and August, for a new final rate of 4.35%, up from 4.1%.

In Canada, the consensus for this week's meeting is for a hawkish hold. Lately the inflation data for the Canadian economy has proven to be more persistent and above expectations. The GDP was also strong and the labor market remains tight. The Governor stressed that if inflation poses upside risks they are prepared to hike again, but is also aware that monetary policy impact can be lagging. All eyes will be on any potential hints about a hike in July. As a reminder the BoC last hiked its interest rates in January and has been holding rates at 4.5% since then. Analysts from Scotiabank believe a 25bps is warranted for this week due to the high core inflation and economic growth.

USD/CAD expectations

On the H1 chart, USD/CAD looks good for selling opportunities from a technical perspective. The pair ended the week near the 1.3410 level of support and, if rejected, can go to test the resistance at 1.3550. If the price doesn’t manage to break through the resistance it could resume its downtrend and test the support at 1.3330.

Last week the CAD was supported by the rise in commodity prices, especially crude oil, with which it has a strong correlation.

USDCAD 1 hour chart

This article was written by Gina Constantin.