USD
- The Fed left interest rates unchanged as expected 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 Core PCE came in line with expectations.
- The labour market is starting to show some weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board.
- The US Consumer Confidence and University of Michigan Consumer Sentiment continue to fall.
- The recent US ISM Manufacturing PMI missed expectations by a big margin, followed by a disappointing ISM Services PMI, although the latter remained in expansion.
- The recent Fedspeak has been leaning on the hawkish side, but the inflation and labour market reports before the next meeting will decide whether they will indeed hike or not.
- The market doesn’t expect the Fed to hike anymore.
CAD
- 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 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 a 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 erased almost entirely the selloff after the FOMC and the NFP report as the price is now back near the 1.3862 resistance. This might even turn into a “break and retest” pattern with the rejection from the broken trendline making it likely. The sellers should step in around these levels to target a drop into the major trendline around the 1.3650 level.
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 pull back into the swing support around the 1.3750 level where we can also find the 50% Fibonacci retracement level for confluence. The sellers, on the other hand, will want to see the price breaking below the support to increase the bearish bets into the 1.3650 level.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the pair has been diverging with the MACD trading into the resistance. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the target for the pullback should be the 1.3750 support, while a break below it would confirm a reversal.
Upcoming Events
This week we have some top tier economic releases. We begin today with the US CPI report which might be one of the most important events of the week. Tomorrow, we have the US Retail Sales and PPI data, while on Thursday we conclude with the latest US Jobless Claims figures.