US:
- The Fed left interest rates unchanged as expected.
- 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 as they are trying to find the optimal level of rates. Powell also added that the soft landing is not the base case at the moment, although they are aiming for it.
- The latest US Core PCE came in line with expectations with disinflation continuing steady.
- The labour market displayed signs of softening although it remains fairly solid as seen also last week with a strong beat in Jobless Claims.
- The ISM Manufacturing PMI beat expectations yesterday in another sign that the US economy remains resilient.
- The market doesn’t expect the Fed to hike again at the moment.
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 and last week we got another beat across the board.
- On the labour market side, the recent report showed another uptick in wage growth and this is something that Governor Macklem said the BoC is watching carefully.
- The market doesn’t expect the BoC to hike at the upcoming meeting.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the USDCAD pair spiked lower towards the 1.34 support zone and shot higher on Friday for no clear reason other than weakness in the oil market and a flat GDP report. Such huge rallies get overstretched pretty fast as depicted by the price 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 that there’s no clear level where to lean on, but the buyers might want to wait for the price to pull back into the 38.2% Fibonacci retracement level where they will also find the confluence with the red 21 moving average and the 1.36 handle. The sellers, on the other hand, might start to pile in around current highs to position for another drop into the 1.35 support.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might see a pullback into the previous resistance now turned support around the 1.3668 level where the buyers are likely to step in with a defined risk below the support to target new higher highs. The sellers, on the other hand, will want to see the price breaking the support to pile in and position for a drop into the 1.36 handle ultimately targeting the 1.35 support.
Upcoming Events
This week we have many key economic releases that will culminate in the US NFP report on Friday. Today, we will have the US Job Openings data which led to a strong selloff the last time as the big miss made Treasury yields to fall due to less labour market tightness and less hawkish Fed expectations. Tomorrow, it will be the time for the ADP report and the ISM Services PMI. On Thursday, we will see the Jobless Claims data, which continues to show a solid labour market. Finally on Friday, it will be the time for the NFP report which is the only one the Fed will see before its next rate decision and the Canadian Jobs data.
