USDCAD Fundamental Analysis
US
- The Fed left interest rates unchanged as expected at the last meeting.
- The macroeconomic projections were revised higher, and the Dot Plot showed that the FOMC still expects another rate hike by the end of the year with less rate cuts projected in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
- The US Core PCE last week came in line with expectations, so the market’s pricing barely changed.
- The labour market remains pretty resilient but we are starting to see some weakness as Continuing Claims missed expectations once again last week pointing to an upward trend.
- The US Retail Sales recently beat expectations by a big margin with positive revisions to the prior figures, suggesting the consumers’ spending remains solid.
- The recent US PMIs showed that the economy now looks more balanced.
- Fed Chair Powelland other FOMC members continue to highlight the rise in long term yields as doing the job for the Fed and therefore they are expected to keep rates steady this week.
- 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 less hawkish speech in the press conference compared to his previous remarks.
- The recent Canadian CPI missed across the board and the underlying inflation measures eased, which was a welcome development for the BoC.
- On the labour market side, the last 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 anymore.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the USDCAD pair reached the key 1.3862 resistance level and got rejected as the sellers stepped in with a defined risk above it to target a drop into the bottom trendline. We can notice that we had a divergence with the MACD right at the resistance which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we should get at least a pullback into the bottom trendline around the 1.3750 level where we will also find the red 21 moving average for confluence.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the buyers would be better off waiting for the price to fall into the support zone around the 1.3750 level where we can find the confluence of the trendline and the 38.2% Fibonacci retracement level. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the next major trendline around the 1.36 handle.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we had another divergence with the MACD signalling a possible pullback right at the resistance. If the price breaks through the recent low around the 1.3812, we can expect more sellers piling in and targeting the 1.3750 support zone.
Upcoming Events
This week, we will get lots of tier one data points with the US labour market and the FOMC decision in focus. Today, we have the US Employment Cost Index and the Consumer Confidence report. Tomorrow, it will be the time for the US ADP, the ISM Manufacturing PMI, the Job Openings data and the FOMC rate decision. On Thursday we will have the US Jobless Claims data, while on Friday we conclude the week with the US NFP report, the Canadian Labour Market data and the ISM Services PMI.
See the video below
