USD
- The Fed left interest rates unchanged as expected at the last meeting while dropping the tightening bias in the statement but adding a slight pushback against a March rate cut.
- The US CPI beat expectations for the second consecutive month with the disinflationary trend reversing.
- The US PPI beat expectations across the board by a big margin.
- The US Jobless Claims beat expectations with the data remaining steady.
- The latest US PMIs increased further from the prior month with the Manufacturing PMI beating expectations and the Services PMI missing.
- The US Retail Sales missed expectations across the board by a big margin.
- The market now expects the first rate cut in June.
CAD
- The BoC left interest rates unchanged at 5.00% as expected and dropped the language about being prepared to hike if needed.
- The latest Canadian CPI missed expectations across the board with the underlying inflation measures falling, which will be a welcome development for the BoC.
- On the labour market side, the latest report beat expectations but we saw a contraction in full-time employment and a fall in wage growth.
- The Canadian PMIs improved in January although they remain both in contractionary territory.
- The market expects the first rate cut in June.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD probed below the trendline and red 21 moving average but reversed the move quickly, eventually finishing back above it. This might have been a fakeout, which is generally a reversal pattern, so the buyers could start to pile in with more conviction to position for a rally into the 1.3620 level. The sellers, on the other hand, will want to see the price falling back below the trendline to position for a drop into the 1.3360 level.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the price action around the trendline with the break and the quick rebound. We can also notice that the latest leg lower diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be a signal for a pullback into the downward trendline where we will likely find the sellers stepping in to target a break below the major upward trendline. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 1.3620 level.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we had a counter-trendline for the pullback into the major trendline which was eventually breached this morning. The buyers should keep on bidding the price into the downward trendline but if the price were to reverse and break below the support zone around the 1.3460 level though, we can expect the sellers to pile in more aggressively to extend an eventual selloff into the 1.3360 level.
