USD
- The Fed left interest rates unchanged as expected while dropping the tightening bias in the statement but adding a slight pushback against a March rate cut.
- Fed Chair Powell stressed that they want to see more evidence of inflation falling back to target and that a rate cut in March is not their base case.
- The latest US GDP beat expectations by a big margin.
- The US PCE came mostly in line with expectations with the Core 3-month and 6-month annualised rates falling below the Fed’s 2% target.
- The US NFP report beat expectations across the board by a big margin.
- The ISM Manufacturing PMI surprised to the upside with the new orders index, which is considered a leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat expectations across the board with the employment sub-index erasing the prior drop and prices paid jumping above 60.
- The US Consumer Confidence report came in line with expectations but the labour market details improved considerably.
- The market now expects the first rate cut in May.
CAD
- The BoC left interest rates unchanged at 5.00% as expected and dropped the language about being prepared to hike if needed.
- The latest Canadian CPI beat expectations across the board with the underlying inflation measures remaining elevated, which should give the BoC a reason to wait for more data before considering rate cuts.
- On the labour market side, the latest report missed expectations although wage growth spiked to the highest level since 2021.
- The Canadian PMIs improved in January although they remain both in contractionary territory.
- The market expects the BoC to start cutting rates in June.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD bounced on the 50% Fibonacci retracement level and rallied all the way up to the recent high following the strong US NFP report. The sellers stepped in around the high with a defined risk above it to position for a drop into new lows. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the next resistance at 1.3620.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair is now at a key support zone around the 1.3450 level where we can also find the confluence with the 50% Fibonacci retracement level and the daily 21 moving average. This is where the buyers are likely to step in with a defined risk below the support to position for a rally into the 1.3540 resistance targeting a break above it. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and increase the bearish bets into the 1.3360 level.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has been diverging with the MACD falling into the support zone. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got a pullback into the 1.3493 level where the sellers stepped in and pushed the pair back into the support. We now have this range between the 1.3450 support and 1.3493 resistance. A break on either side should be followed by a sustained move in the direction of the breakout.
Upcoming Events
Today the only notable event on the agenda is the Canadian labour market report where the market will focus especially on wage growth since the BoC placed a great emphasis on it.
