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 US GDP beat expectations by a big margin.
  • 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 missing expectations this week but hovering around cycle lows.
  • The latest US PMIs beat expectations by a big margin for both the Manufacturing and Services measures.
  • 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 sees 50/50 chance of a rate cut in March.

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 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 breakouts 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 pair has been consolidating recently between the 1.3430 support and 1.3530 resistance. In such instances, one can “play the range” by buying at support and selling at resistance. In fact, the buyers would have a much better risk to reward setup if they bought at support targeting the 1.36 handle, while the sellers would have it by selling at resistance targeting a breakout below the support.

USDCAD Technical Analysis – 1 hour Timeframe

USDCAD Technical Analysis
USDCAD 1 hour

On the 1 hour chart, we can see that the sellers stepped in around the 38.2% Fibonacci retracement where we had also the red 21 moving average for confluence to target a drop into the support and eventually a breakout. The buyers, on the other hand, will likely pile in around the support to position for a rally back into the resistance and increase the bullish bets if the price were to break above the downward trendline.

Upcoming Events

Today the only notable release will be the US PCE report.