US:
- The Fed hiked by 25 bps as expected and kept everything unchanged.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- The US economic data keeps on surprising to the upside, but inflation expectations and CPI readings continue to show disinflation with the last two Core CPI M/M figures coming in at 0.16%.
- The US PMIs missed expectations across the board and brought down Treasury yields weakening the US Dollar, but the US Jobless Claims came out better than expected once again and supported the USD.
- At the moment, the market doesn’t expect another hike from the Fed, but the next NFP and CPI data will be crucial to confirm or change this view.
Canada:
- The BoC hiked rates by 25 bps as expected at the last meeting as the central bank doesn’t like the persistently high underlying inflation with a tight labour market.
- In the recently released Meeting Minutes the BoC seems less in a rush to hike rates again.
- The Canadian underlying inflation data beat expectations on all measures for the June readings and last week we got another beat for the July data.
- On the labour market side, the last report showed that the unemployment rate increased once again, but the average hourly earnings surprised to the upside as well.
- The Canadian Core Retail Sales missed expectations.
- Overall, it’s a mixed picture for the BoC.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD has been rallying non-stop since the beginning of August and the breakout above the trendline increased the bullish pressure even more. The pair recently broke above the 1.3553 resistance and it’s now eyeing the next resistance at 1.3664. The trend remains firmly bullish as the price keeps printing higher highs and higher lows with the moving averages being crossed to the upside. The sellers will need to wait for some strong break of key levels before considering new shorts.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that USDCAD keeps on diverging with the MACD as it heads towards new highs. This is generally a sign of weakening momentum often followed by pullbacks or reversals. Up to now, we only got pullbacks into previous swing levels and recently into the black trendline. If we get another pullback, we can expect the buyers to lean on the trendline again to position for more upside. The sellers, on the other hand will want to see the price breaking through the trendline signalling a reversal this time and pile in to target a selloff into the 1.34 handle.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that there’s not much to work on as the price action remains choppy with a bullish tilt. The buyers are likely to pile in even more if the price breaks above the recent high at 1.3604 to target the 1.3664 resistance. The sellers should just wait for the price to either reach the resistance or break through the trendline.
Upcoming Events
Today the only major event is Fed Chair Powell’s speech at the Jackson Hole Symposium. The expectations though are for him to take a “wait and see” approach as we have more key economic data ahead before the next FOMC meeting.
