US:
- The Fed left interest rates unchanged as expected at the last meeting.
- The macroeconomic projections were revised higher, and the Dot Plot showed that the FOMC still expects another rate hike by the end of the year with less rate cuts in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
- The US CPI yesterday beat expectations on the headline figures, but the core measures came in line with forecasts and the market’s pricing barely changed.
- The labour market remains fairly solid as seen last week with the NFP report and yesterday’s Jobless Claims.
- The ISM Manufacturing PMI beat expectations while the ISM Services PMI came in line with forecasts in another sign that the US economy remains resilient.
- The Fed members continue to cite elevated long-term yields as a reason to proceed carefully and likely pause in November as well.
- The market doesn’t expect the Fed to hike anymore.
Canada:
- The BoC left interest rates at 5.00% as expected but remains prepared to raise rates further if needed.
- BoC Governor Macklem delivered a hawkish speech which points to another rate hike if the data remains strong into the next policy meeting.
- The Canadian underlying inflation data has been beating expectations month after month with another beat across the board recently.
- On the labour market side, the recent report beat expectations and showed another uptick in wage growth, which is something that Governor Macklem said the BoC is watching carefully.
- The market doesn’t expect the BoC to hike at the upcoming meeting with odds hovering around 40%, but the central bank is not afraid to deliver surprising decisions.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the USDCAD pair pulled back into the red 21 moving average where it bounced and then rallied strongly following the release of the US CPI report. Yesterday’s reaction though was a bit perplexing as market’s pricing on interest rates expectations hasn’t changed. We will see in the next few days if the market continues on this direction or fades completely the CPI reaction.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price got a bit overstretched as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move. The sellers might step in around the 61.8% Fibonacci retracement level to position for a drop into the major trendline around the 1.35 handle. The buyers, on the other hand, are likely to pile in at the blue 8 moving average, although they will have a better risk to reward setup around the 1.3620 support.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the support around the 1.3620 level has the confluence from the previous resistance now turned support, the 61.8% Fibonacci retracement level and the 4-hour red 21 moving average. This is going to be a nice level for the buyers to lean on with a defined risk below it to position for a rally into the 1.3862 level. The sellers, on the other hand, will want to see the price breaking below the support to increase the bearish bets into the 1.35 handle.
Upcoming Events
Today the only notable event on the agenda is the University of Michigan Consumer Sentiment report although it has lost its market moving ability lately. Only big surprises are likely to have an impact on the market.
