The Fed hiked interest rates by 25 bps as expected and kept everything else unchanged. Fed Chair Powell just reaffirmed their data dependency and kept all the options on the table. The economic data since the FOMC meeting has been supporting the soft-landing narrative as the labour market data remains strong and the inflation data keeps missing expectations.
On the other hand, 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 recent Canadian underlying inflation data beat expectations on all measures, but the Canadian Retail Sales missed across the board. Overall, it’s a mixed picture for the BoC and it puts them in a tough position.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD has finally broke above the 1.3225 resistance with conviction and rallied to the next resistance at 1.33. The buyers will need the price to break this resistance with conviction to pile in even more and extend the rally towards the 1.34 handle.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had recently a failed breakout of the resistance that led to a quick selloff into the trendline and the previous swing low. The buyers though stepped in with an even better risk to reward setup and eventually managed to get the breakout.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has recently rejected the 1.33 resistance and pulled back into the 1.3260 support where we had also the red 21 moving average for confluence. We are starting to see a divergence with the MACD though, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, if we do get a pullback, the buyers are likely to lean on the 1.3260 support again to target the 1.34 handle. The sellers, on the other hand, will need the price to break below the support to pile in and target new lows.
Upcoming Events
Today we have the US ADP report which is generally a less reliable indicator of the labour market, but it can nonetheless move the market. Tomorrow, the market will focus on the US Jobless Claims and the ISM Services PMI data. On Friday, all eyes will be on the US NFP report. Strong data should give the USD a boost, while weak readings should weigh on the greenback.