US:
- The Fed left interest rates unchanged as expected at the last meeting.
- 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.
- The latest US Core PCE came in line with expectations with disinflation continuing steady.
- The labour market remains fairly solid as seen last week with another strong beat in Jobless Claims and the NFP report.
- The ISM Manufacturing PMI beat expectations while the ISM Services PMI came in line with forecasts in another sign that the US economy remains resilient.
- The market doesn’t expect the Fed to hike anymore.
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 with another beat across the board recently.
- On the labour market side, the recent report beat expectations and showed another uptick in wage growth, which is something that Governor Macklem said the BoC is watching carefully.
- The market doesn’t expect the BoC to hike at the upcoming meeting with odds hovering around 40%, but the central bank is not afraid to deliver surprising decisions.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the USDCAD pair recently broke above a key resistance level around 1.3668, but sold off soon after helped by a strong Canadian jobs report that raised the chances of another rate hike from the BoC on October 25. We can notice also that the last leg higher diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might see the price falling into the trendline before finding strong buyers.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that as soon as the price broke through the strong support around the 1.3660 level, the bearish momentum intensified as more sellers piled in to target the upward trendline around the 1.35 handle. We have another support zone around the 1.3550 level where we can find the previous swing level and the 61.8% Fibonacci retracement level for confluence. That’s where we can expect the buyers to step in with a defined risk below the zone to target a new high.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward trendline that coupled with the red 21 moving average is likely to act as resistance for the current downtrend. In fact, we can expect the sellers to lean on the trendline with a defined risk above it to position for a drop into the 1.35 handle. The buyers, on the other hand, will want to see the price breaking above the trendline to pile in and target a new high.
Upcoming Events
This week the market is likely to focus on the CPI report as that’s what might change the expectations around the next FOMC rate decision. Tomorrow, we will see the US PPI data and later in the day the FOMC Meeting Minutes. On Thursday, it will be the time for the US CPI report, and at the same time we will also get the latest Jobless Claims figures. On Friday we conclude the week with the University of Michigan Consumer Sentiment report.
