USD

  • The Fed left interest rates unchanged as expected at the last meeting with a shift in the statement that indicated the end of the tightening cycle.
  • The latest US CPI slightly beat expectations but analysts expect the Core PCE to print at 0.2% M/M again following the CPI data.
  • The labour market continues to soften but remains resilient with US Jobless Claims beating expectations week after week.
  • The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
  • The US Retail Sales beat expectations across the board.
  • The University of Michigan Consumer Sentiment report jumped to the highest levels since 2021.
  • The Fed members recently have been pushing back on the aggressive rate cuts expectations.
  • The market’s expectations for the first rate cut were pushed back to May following strong economic data.

CAD

  • The BoC kept the interest rate steady at 5.00% as expected at the last meeting with the usual caveat that it’s prepared to raise the policy rate further if needed.
  • The latest Canadian CPI beat expectations across the board with the underlying inflation measures remaining elevated, which should give the BoC a reason to wait for more data before considering rate cuts.
  • On the labour market side, the latest report missed expectations although wage growth spiked to the highest level since 2021.
  • The Canadian PMIs continue to fall further into contraction as the economy keeps on weakening amid restrictive monetary policy.
  • The market expects the BoC to start cutting rates in Q2.

USDCAD Technical Analysis – Daily Timeframe

USDCAD Technical Analysis
USDCAD Daily

On the daily chart, we can see that USDCAD broke through the key trendline and extended the rally into the 1.35 handle. This breakout opened the door for a move into the swing high resistance around the 1.36 handle where we can also find the 61.8% Fibonacci retracement level for confluence. The buyers should keep on looking for dip-buying opportunities on the lower timeframes while the sellers will want to see the momentum changing and some key breaks before piling in more aggressively.

USDCAD Technical Analysis – 4 hour Timeframe

USDCAD Technical Analysis
USDCAD 4 hour

On the 4 hour chart, we can see that the price broke through the key upward trendline but bounced from the 61.8% Fibonacci retracement level. If the price were to make a new higher high, then the fakeout would be confirmed and the buyers will likely pile in more aggressively to target the 1.36 handle.

USDCAD Technical Analysis – 1 hour Timeframe

USDCAD Technical Analysis
USDCAD 1 hour

On the 1 hour chart, we can see that the price got rejected from the downward trendline as the sellers stepped in to position for a drop into new lower lows. The bearish momentum looks weak though and we could see a break above the trendline which would see the buyers increasing their bullish bets into the 1.36 resistance.

Upcoming Events

This week is a bit more tranquil on the data front with the major releases scheduled for the final part of the week. We begin tomorrow with the BoC rate decision and the US PMIs. On Thursday, we have the Advance US Q4 GDP and the latest US Jobless Claims figures. Finally, on Friday we conclude the week with the US PCE report.