USD
- The Fed left interest rates unchanged as expected at the last meeting with a shift in the statement that indicated the end of the tightening cycle.
- The Summary of Economic Projections showed a downward revision to Growth and Core PCE in 2024 while the Unemployment Rate was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts in 2024 compared to just two in the last projection.
- Fed Chair Powell didn't push back against the strong dovish pricing and even said that they are focused on not making the mistake of holding rates high for too long.
- The latest US CPI slightly beat expectations but analysts expect the Core PCE to print at 0.2% M/M again following the CPI data.
- The labour market continues to soften but remains resilient with US Jobless Claims beating expectations week after week.
- The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
- The US Retail Sales beat expectations across the board.
- The Fed members recently have been pushing back on the aggressive rate cuts expectations.
- The market expectation for a rate cut in March fell to roughly 50%.
CAD
- The BoC kept the interest rate steady at 5.00% as expected at the last meeting with the usual caveat that it’s prepared to raise the policy rate further if needed.
- BoC Governor Macklem recently has been leaning on a more neutral side and even started to talk about rate cuts although he remains uncertain on the timing.
- 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 continue to fall further into contraction as the economy keeps on weakening amid restrictive monetary policy.
- The market expects the BoC to start cutting rates in Q2.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD broke through the key trendline and extended the rally into the 1.35 handle. This breakout opened the door for a move into the swing high resistance around the 1.36 handle where we can also find the 61.8% Fibonacci retracement level for confluence. The buyers should keep on looking for dip-buying opportunities on the lower timeframes while the sellers will want to see the momentum changing and some key breaks before piling in more aggressively.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have an upward trendline now that will define the current uptrend. From a risk management perspective, the buyers will have a much better risk to reward setup around the trendline where they will also find the previous swing high and the 50% Fibonacci retracement level for confluence. The sellers, on the other hand, will want to see the price breaking below the trendline to invalidate the bullish setup and position for a drop into the 1.3225 support zone.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the pair has been pulling back recently from overstretched levels. We can also notice that the price diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the target for the pullback should be right around the 50% Fibonacci retracement level.
Upcoming Events
Today, the only notable events will be the Canadian Retail Sales data and the University of Michigan Consumer Sentiment survey.
