Over the past week, many central bank speakers have shared their perspectives. The prevailing consensus remains unchanged: a wait-and-see approach is favoured to gauge the necessity of further tightening. While the majority of the FOMC expects two additional rate hikes this year, they consistently highlight that such decisions are subject to the data. The latest data from last week leans towards a hike though as the housing market indicators surprised to the upside, the US Jobless Claims remained pretty stable, and the US Services PMI beat forecasts.
Naturally, the upcoming release of the NFP and CPI reports will have a pivotal role in shaping future actions but as long as we keep seeing positive data, it is likely that the market's current expectation of a rate increase by the Fed in July will be realized. On a different note, the BoC surprised with a rate hike at the last meeting citing stubbornly high inflation with the market expecting another hike from the BoC all else being equal.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that after breaking below the key 1.3225 support, USDCAD kept on falling with the 1.30 handle being the likely target for the sellers. The trend has been really strong as the price couldn’t even probe above the short-term blue 8 moving average. The trend is clearly bearish, so it’s a tricky environment for the buyers. In fact, they should have much more conviction if the price rises above the 1.3225 level again.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been diverging with the MACD for a long time. This is generally a sign of a weakening momentum often followed by pullbacks or reversals. In fact, USDCAD kept on pulling back into the trendline and continuing its downtrend. We can expect the price to pull back again into the trendline soon which will be another opportunity for the sellers to re-enter the market or an opportunity for the buyers to ride a reversal in case the price breaks above the trendline.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the last pullback got rejected at the 1.3225 support turned resistance and the 61.8% Fibonacci retracement level. Today we have the Canadian CPI and if we see a miss, we should see USDCAD rally towards the trendline and possibly even higher. On the other hand, if we see a beat, we may see another push to the downside.
This week is a bit bare on the data front but today we have the Canadian CPI that may have a big impact on the pair depending on the outcome. Later in the week we have the US Jobless Claims on Thursday and the US PCE scheduled for Friday. We will also hear again from many central bank members.
