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 US GDP beat expectations by a big margin.
- The US PCE came mostly in line with expectations and the Core 3-month and 6-month annualised rates are now below the Fed’s 2% target.
- The labour market continues to soften but remains resilient with US Jobless Claims missing expectations last week but hovering around cycle lows.
- The latest US PMIs beat expectations by a big margin for both the Manufacturing and Services measures.
- The US Retail Sales beat expectations across the board.
- The University of Michigan Consumer Sentiment report jumped to the highest levels since 2021.
- The Fed members recently have been pushing back on the aggressive rate cuts expectations.
- The market sees a 50/50 chance of a rate cut in March.
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 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 pair recently got stuck in a consolidation and the price is now at the red 21 moving average. This is where the buyers might step in to position for a rally into the 1.36 handle.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair has been consolidating between the 1.3430 support and 1.3530 resistance. The price yesterday broke below the support and triggered more selling pressure as the sellers piled in to target a drop into the 1.3225 level. The buyers will want to see the price to reverse and break above the support again to leave behind a fakeout and position for a rally into new highs.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that from a risk management perspective, the sellers will have a much better risk to reward setup around the support now turned resistance where they will also find the confluence of the trendline and the Fibonacci retracement levels. Moreover, we can see that the latest leg lower diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. This makes the pullback even more likely.
Upcoming Events
This week is going to be a really busy one with the FOMC rate decision and lots of economic data on the agenda. We begin today with the US Job Openings and the US Consumer Confidence reports. Tomorrow we will see the Canadian GDP, and the US Employment Cost Index and the ADP data before the FOMC rate decision. On Thursday, we have the Canadian Manufacturing PMI, the US Jobless Claims and the ISM Manufacturing PMI. Finally, on Friday, we conclude the week with the US NFP report.
