USD
- The Fed left interest rates unchanged as expected at the last meeting and dropped the tightening bias in the statement.
- The US CPI and the US PPI beat expectations for the second consecutive month.
- The NFP report beat expectations on the headline number, but the unemployment rate and the average hourly earnings missed notably. Moreover, the US Jobless Claims beat expectations across the board with a big positive revision to Continuing Claims.
- The latest US ISM Manufacturing PMI missed expectations by a big margin remaining in contraction with the US ISM Services PMI following suit but holding on in expansion.
- The US Retail Sales missed expectations across the board although the data improved from the prior month.
- The market sees basically a 50/50 chance of a hike in June now.
CAD
- The BoC left interest rates unchanged at 5.00% as expected stating that further easing in underlying inflation is needed.
- The latest Canadian CPI missed expectations across the board with the underlying inflation measures falling.
- On the labour market side, the latest report beat expectations but we saw a fall in wage growth which is something that the BoC is watching closely.
- The Canadian PMIs improved in January although they remain both in contractionary territory.
- The market expects the first rate cut in June.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD broke through the key resistance level at 1.3540 and extended the rally into new highs. The buyers piled in on the breakout and will now target the 1.3620 level. That’s where we can expect to find the sellers to step in with a defined risk above the level to position for a drop into the 1.3359 level.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price recently consolidated around the 1.3540 level before moving up as the buyers piled in around the red 21 moving average. From a risk management perspective, the buyers will have a much better risk to reward setup around the trendline, although this looks like a story for another time as the current bullish momentum seems strong enough to reach the 1.3620 level first. The sellers, on the other hand, will want to see the price breaking below the trendline to invalidate the bullish setup and increase the bearish bets into the 1.3359 level.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the latest leg higher is diverging with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be a signal for a pullback into the minor black trendline where we will also find the 4-hour 21 moving average for confluence. This is where we can expect the buyers to step in with a defined risk below the trendline to position for a rally into the 1.3620 level with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking lower to pile in for a drop into the major trendline around the 1.35 handle.
Upcoming Events
Today we get the Canadian CPI figures. Tomorrow, we have the FOMC rate decision on the agenda where the central bank is expected to keep rates unchanged. On Thursday, we get the latest US PMIs and Jobless Claims figures. Finally, on Friday, we conclude the week with the Canadian Retail Sales data.
