US:
- The Fed hiked by 25 bps as expected and kept everything unchanged.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- The US economic data keeps on surprising to the upside, but inflation expectations and CPI readings continue to show disinflation with the last two Core CPI M/M figures coming in at 0.16%.
- At the moment, the market doesn’t expect another hike from the Fed, but the next NFP and CPI data will be crucial to confirm or change this view.
Canada:
- The BoC hiked rates by 25 bps as expected at the last meeting as the central bank doesn’t like the persistently high underlying inflation with a tight labour market.
- In the recently released Meeting Minutes the BoC seems less in a rush to hike rates again.
- The Canadian underlying inflation data beat expectations on all measures for the June readings and last week we got another beat for the July data.
- On the labour market side, the last report showed that the unemployment rate increased once again, but the average hourly earnings surprised to the upside as well.
- Overall, it’s a mixed picture for the BoC but it should be more skewed to the hawkish side.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD broke above the key downward trendline and extended the rally into the 1.3553 resistance. The price has been struggling to break above the resistance and the pair started to consolidate just beneath the level. We will likely need a catalyst to push the price above the resistance and cause another rally.
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 while. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we saw many pullbacks along the way, and we will likely see another one into the black trendline where we can also find the confluence with the previous resistance now turned support and the 38.2% Fibonacci retracement level. This is where the buyers are likely to pile in with a defined risk below the trendline to target a breakout of the 1.3553 resistance.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we are basically stuck in a range now between the 1.3553 resistance and the 1.3500 support. A break on either side should lead to a quick move as the momentum is likely to pick up.
Upcoming Events
This week is pretty empty on the economic data side as we will only have the PMIs tomorrow and the US Jobless Claims on Thursday. Given the strong appreciation in the US Dollar seen in the past weeks, we can expect some USD weakness if the data misses expectations, and we will likely need much stronger than expected readings to see another sustained rally in the greenback. Remember also that this is the Jackson Hole Symposium week, so we will hear from many central bankers including Fed Chair Powell, who is set to speak on Friday.