USD
- The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement.
- Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
- The US Core PCE last week came in line with forecasts with the disinflationary progress continuing steady.
- The labour market is starting to show weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board.
- The ISM Manufacturing PMI last week missed expectations falling further into contraction.
- The recent US Consumer Confidence report beat expectations although the details about the labour market continued to weaken.
- The hawkish Fed members recently shifted their stance to a more neutral position.
- The market expects the Fed to start cutting rates as soon as Q1 2024.
CAD
- The BoC left interest rates at 5.00% as expected at the last meeting but remains prepared to raise rates further if needed.
- BoC Governor Macklem delivered a less hawkish speech in the press conference compared to his previous remarks.
- The recent Canadian CPI missed expectations across the board and the underlying inflation measures eased, which was a welcome development for the BoC.
- On the labour market side, the latest report beat expectations although the unemployment rate ticked higher again.
- The market expects the BoC to start cutting rates in Q2 2024.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that since the break below the key trendline, the USDCAD pair just kept on selling off supported by the weakening US data and the aggressive rate cut pricing for the Fed. The target for the sellers should be the swing low around the 1.3382 level, but the trend might reverse if the data starts to roll off faster and we get a strong risk off sentiment across the board, so that will be something to watch out for.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the latest leg lower diverged with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got a pullback into the minor trendline around the 1.3565 level where the sellers are likely to lean onto to position for another drop into new lows. If the price breaks higher though, the buyers should pile in to target a correction into the major trendline around the 1.3640 level where we can also find the confluence with the 50% Fibonacci retracement level.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is breaking above the minor trendline and we should see the buyers starting to pile in to target the 1.3640 resistance. The sellers, on the other hand, will want to see the breakout fail with the price falling below the counter-trendline to step in more aggressively and take the pair into new lows.
Upcoming Events
This week we will see lots of US labour market data culminating with the NFP release on Friday. Today, we have the ISM Services PMI and the US Job Openings reports. Tomorrow, we will get the US ADP data and the BoC rate decision, where the central bank is expected to keep rates steady. On Thursday, it will be the time for the US Jobless Claims figures, while on Friday we conclude the week with the NFP report.
