USD
- The Fed left interest rates unchanged as expected at the last meeting while dropping the tightening bias in the statement but adding a slight pushback against a March rate cut.
- 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 Jobless Claims beat expectations with the data remaining steady.
- The latest US PMIs increased further from the prior month with the Manufacturing PMI beating expectations and the Services PMI missing.
- 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 missed expectations across the board with the underlying inflation measures falling, which will be a welcome development for the BoC.
- 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 is still consolidating around the key trendline as the weak divergence between the two central banks is keeping the pair in a tight range. Nonetheless, the current technical break could trigger a bigger move, so the sellers might start to position for a drop into the 1.3360 level.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price broke above the downward trendline yesterday before erasing most of the move and ending the day lower. Today the move extended to the downside, and we are now seeing a breakout. It might be another fakeout, but this is where we can expect the sellers to step in to target a drop into the 1.3360 level. The buyers, on the other hand, will want to see the price bouncing back above the trendline before piling in and target the 1.3620 level.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action and the breakout. The first target for the sellers should be the support zone around the 1.3460 level. That will be the last line of defence for the buyers as a break lower will likely trigger a selloff to the 1.3360 level.
Upcoming Events
This week we have some important economic data on the agenda. We begin today with the release of the US Consumer Confidence report. On Thursday, we will see the US PCE and the latest US Jobless Claims figures. Finally, on Friday, we conclude the week with the US ISM Manufacturing PMI.
