USD

  • The Fed left interest rates unchanged as expected while dropping the tightening bias in the statement but adding a slight pushback against a March rate cut.
  • Fed Chair Powell stressed that they want to see more evidence of inflation falling back to target and that a rate cut in March is not their base case.
  • The latest US GDP beat expectations by a big margin.
  • The US PCE came mostly in line with expectations with the Core 3-month and 6-month annualised rates falling below the Fed’s 2% target.
  • The US NFP report beat expectations across the board by a big margin.
  • The ISM Manufacturing PMI surprised to the upside with the new orders index, which is considered a leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat expectations across the board with the employment sub-index erasing the prior drop and prices paid jumping above 60.
  • The US Consumer Confidence report came in line with expectations but the labour market details improved considerably.
  • The market now expects the first rate cut in May.

CAD

  • The BoC left interest rates unchanged at 5.00% as expected and dropped the language about being prepared to hike if needed.
  • The latest Canadian CPI beat expectations across the board with the underlying inflation measures remaining elevated.
  • On the labour market side, the latest report beat expectations but we saw a contraction in full-time employment and a fall in wage growth.
  • The Canadian PMIs improved in January although they remain both in contractionary territory.
  • The market expects the BoC to start cutting rates in June.

USDCAD Technical Analysis – Daily Timeframe

USDCAD Technical Analysis
USDCAD Daily

On the daily chart, we can see that USDCAD remains stuck in a big range between the 50% Fibonacci retracement level and the resistance around the 1.3540 level. There’s not much to do here other than waiting for a breakout but in the meantime, traders can “play the range” by buying at support and selling at resistance.

USDCAD Technical Analysis – 4 hour Timeframe

USDCAD Technical Analysis
USDCAD 4 hour

On the 4 hour chart, we can see that the pair recently bounced on the 61.8% Fibonacci retracement level of the entire US NFP rally. The sellers will want to see the price breaking lower to increase the bearish bets into the 50% Fibonacci retracement level. The buyers, on the other hand, will keep on stepping in around the 61.8% Fibonacci retracement level to position for a rally into the 1.3540 resistance targeting a break above it.

USDCAD Technical Analysis – 1 hour Timeframe

USDCAD Technical Analysis
USDCAD 1 hour

On the 1 hour chart, we can see that the price has been diverging with the MACD falling into the 61.8% Fibonacci retracement level. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be a signal of an impending reversal, but the price will need to break above the 1.35 handle to confirm it. In the meantime, we could have another smaller range here.

Upcoming Events

Today we have the main event of the week, that is, the US CPI report. On Thursday we will see latest US Jobless Claims figures and the US Retail Sales. Finally, on Friday, we conclude the week with the US PPI data and the University of Michigan Consumer Sentiment survey.