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 US CPI beat expectations for the second consecutive month with the disinflationary trend reversing.
- The US PPI beat expectations across the board by a big margin.
- The US Initial Claims beat expectations while Continuing Claims missed. Overall, the data remains steady.
- 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 Retail Sales missed expectations across the board by a big margin.
- The market now expects the first rate cut in June.
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.
- On the labour market side, the latest report beat expectations but we saw a contraction in full-time employment and a fall in wage growth.
- The Canadian PMIs improved in January although they remain both in contractionary territory.
- The market expects the first rate cut in June.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD recently broke out of the 1.3540 resistance following the hot US CPI report but failed to sustain the rally as the pair eventually erased all the gains. The price though made a new higher high so we have a trendline now where the buyers should continue to lean onto with a defined risk below it to position for a rally into the 1.3620 level. 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 – 4 hour Timeframe
On the 4 hour chart, we can see more closely the price action following the hot US CPI report with the pair now consolidating around the trendline waiting for a catalyst. There’s not much else to see here so we need to zoom in to get some more details.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price recently broke above the downward trendline and got rejected from the previous swing high level. We have now a minor upward trendline where we can expect the buyers to step in with a defined risk below the major trendline to position for a break above the 1.3510 level and target a break above the 1.3540 resistance next. The sellers, on the other hand, will want to see the price breaking below the major trendline to increase the bearish bets into new lows.
Upcoming Events
Today we will see the latest Canadian CPI where the market will want to see if the disinflationary trend remains intact for the BoC. Tomorrow, we get the FOMC Meeting Minutes while on Thursday we will have the Canadian Retail Sales, the US Jobless Claims and the US PMIs.
