US:
- The Fed left interest rates unchanged as expected.
- The macroeconomic projections were revised higher as the economy showed much stronger resilience than expected and the Dot Plot showed that the majority of members 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 as they are trying to find the optimal level of rates. Powell also added that the soft landing is not the base case at the moment, although they are aiming for it.
- The latest US CPI came in line with expectations, so the market’s pricing remained roughly the same.
- The labour market displayed signs of softening although it remains fairly solid as seen also last week with the strong beat in Jobless Claims.
- The market doesn’t expect the Fed to hike again at the moment.
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 and last week we got another beat across the board.
- On the labour market side, the recent report showed another uptick in wage growth and this is something that Governor Macklem said the BoC is watching carefully.
- The market now sees basically a 50/50 chance that the BoC hikes at the next meeting.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the big correction following first the strong Canadian wage growth data and then the higher-than-expected inflation figures took the USDCAD pair back to the 1.34 handle. The pair bounced on the key support and it’s now consolidating around the previous support now turned resistance around the 1.35 handle. At the moment, the pair looks to have switched to a downtrend given that the price made a new lower low and the moving averages crossed to the downside. The major pairs generally move in sync, so this might be just a more complex pullback before another rally.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the strong resistance around the 1.35 handle where we have also the 38.2% Fibonacci retracement level of the entire correction for confluence. On this timeframe, the price made a new higher high recently and the momentum seems to be leaning towards the upside. The consolidation has also formed an ascending triangle and we can generally see strong and sustained moves after the breakout of such patterns.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the USDCAD tried to break above the resistance recently but got smacked back down into the upward trendline. We can notice though that the pair made another higher low recently, so the buyers are indeed charging towards the resistance. This is now a game of patience as a break to the upside should lead to more buyers piling in and position for a rally into the 1.3668 resistance, while a break to the downside should see the sellers taking the pair into the 1.34 support again and then targeting a break lower.
Upcoming Events
Today we will see the latest US Consumer Confidence report which surprised to the downside the last time and weighed on the USD in the short term as Treasury yields fell. On Thursday, we will have another US Jobless Claims data which keeps on showing strength in the labour market maintaining the hawkish pricing in interest rates expectations. Finally, on Friday, we will get the latest US PCE data.
