The NFP report last Friday missed expectations for the first time after 14 consecutive beats. The other data though were still all solid with the average hourly earnings ticking higher, which is not what the Fed would like to see. In fact, the market expectations for a 25 bps hike at the July meeting remained unchanged, but despite this, the USD weakened across the board.
The BoC is expected to hike by 25 bps tomorrow as the inflation rate continues to be high and the jobs market remains tight. There is also a chance that the BoC decides to skip this meeting, which should give the USDCAD a boost to the upside, especially if the US CPI beats expectations.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the break below the key 1.3225 support might have been just a fakeout and now we may see more upside for the pair. In fact, the moving averages have now crossed to the upside as the bullish momentum prevailed. The buyers are likely to step in now leaning on the red 21 moving average near the 1.3225 support and target the 1.3664 resistance.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that after the break above the trendline USDCAD rallied and consolidated around the 1.3225 level before pushing to the upside again. The miss in the US NFP report though, caused some weakness in the greenback and the pair fell towards the 1.3225 support again. The sellers will need the price to break below the 1.3225 support decisively to get back control and target new lows.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. If we do get a pullback, a good spot for the sellers to lean on to is the 1.33 handle where we can also find the 38.2% Fibonacci retracement level and the 4-hour 21 moving average for confluence. A break above that resistance would see the buyers entering the market more aggressively and start the rally towards the 1.3664 resistance.
Upcoming Events
Tomorrow we will see the latest US CPI report. which is the main event of the week. A miss to the expected numbers, especially on the core figures, should cause more USD weakness as the market would price out the hawkish bets and price in a more dovish path. Conversely, if the data beats forecasts, we should see the USD higher across the board as the market would price in a more hawkish Fed. We then conclude the week with the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment report on Friday.
