US:
- The Fed left interest rates unchanged as expected at the last meeting.
- The macroeconomic projections were revised higher, and the Dot Plot showed that the FOMC still expects another rate hike by the end of the year with less rate cuts projected in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
- The US CPI last week beat expectations on the headline figures, but the core measures came in line with forecasts and the market’s pricing barely changed.
- The labour market remains fairly solid as seen once again yesterday with the beat inJobless Claims, although continuing claims missed for a second time in a row.
- The US PMIs recently showed that the US economy remains pretty resilient.
- The University of Michigan Consumer Sentiment report last Friday missed across the board with the inflation expectations figures spiking back up.
- The US Retail Sales this week beat expectations by a big margin with positive revisions to the prior figures.
- The Fed members continue to cite elevated long-term yields as a reason to proceed carefully and will likely pause in November as well.
- Fed Chair Powell yesterday highlighted the rise in long term yields as well and the need to “proceed carefully”.
- The market doesn’t expect the Fed to hike anymore.
Canada:
- The BoC left interest rates at 5.00% as expected but remains prepared to raise rates further if needed.
- BoC Governor Macklem delivered a hawkish speech which points to another rate hike if the underlying inflation data remains elevated.
- The Canadian CPI this week missed across the board and the underlying inflation measures eased, which decreased the risk of another rate hike from the BoC.
- On the labour market side, the recent report beat expectations and showed another uptick in wage growth, which is something that Governor Macklem said the BoC is watching carefully.
- The market doesn’t expect the BoC to hike at the upcoming meeting.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the USDCAD pair pulled back into the red 21 moving average where the buyers stepped in and managed to turn the price around helped by the miss in the Canadian CPI data. The target for the buyers should be the swing level around the 1.3862 level where we will likely find strong sellers stepping in with a defined risk above the high to target a drop into the trendline.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is respecting the levels for now and keeps on printing higher highs and higher lows. This looks like a healthy uptrend with the recent bounce on the resistance turned support around the 1.3690 level signalling another possible extension to the upside into the 1.38 handle. A break below the support should turn the bias more bearish as the sellers will likely pile in to target the trendline around the 1.3550 level.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the price action between the key levels. The buyers should pile in near the support with a defined risk below it to position for another rally into the 1.38 handle. More conservative buyers may want to wait for the price to take out the high before joining the trend. The sellers, on the other hand, will want to see the price breaking lower to position for a drop into the trendline.
Upcoming Events
Today the only event on the agenda is the Canadian Retal Sales. The data is unlikely to change anything for the BoC unless the figures deviate significantly from the consensus.
