USD
- The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement.
- Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
- The recent US CPI missed expectations across the board bringing the expectations for rate cuts forward.
- The labour market is starting to show weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board. Last week though, the US Jobless Claims beat forecasts by a big margin, although volatility in the data is normal.
- The latest US PMIs came basically in line with expectations with a miss in the Manufacturing index and a beat in the Services measure.
- The recent Fedspeak has been leaning on the hawkish side, but the recent data suggest that the Fed is likely done for the cycle.
- The market doesn’t expect the Fed to hike anymore.
CAD
- The BoC left interest rates at 5.00% as expected at the last meeting but remains prepared to raise rates further if needed.
- BoC Governor Macklem delivered a less hawkish speech in the press conference compared to his previous remarks.
- The recent Canadian CPI missed expectations across the board and the underlying inflation measures eased, which was a welcome development for the BoC.
- On the labour market side, the latest report missed expectations across the board with negative figures in full-time employment and slowing wage growth, which is going to be another positive outcome for the central bank.
- The market doesn’t expect the BoC to hike anymore.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD broke below the key trendline and extended the drop into the 1.36 handle. From a risk management perspective, the buyers would be better off waiting for a pullback as the price looks a bit overstretched as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the break below the trendline last Friday and the retest yesterday before another drop. The support zone around the 1.3650 level will now be a key resistance as a break to the upside might lead to a reversal back into the downward trendline around the 1.3750 level.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is bouncing around the recent low at 1.3594. The sellers are likely to lean on the downward trendline with a defined risk above it to target the 1.34 handle. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and position for a rally into the 1.3750 level.
Upcoming Events
Today, we will get the latest US Consumer Confidence report and it will be interesting to see how the US consumers see the labour market. On Thursday, we will see the US PCE and US Jobless Claims data with the market likely focusing more on the latter given that we already saw the latest inflation data with the US CPI report just two weeks ago. Finally, on Friday, we conclude the week with the Canadian Labour Market report and the Manufacturing PMI, followed later by the US ISM Manufacturing PMI which missed expectations by a big margin the last time.