US:
- The Fed hiked by 25 bps as expected and kept everything unchanged.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- The US economic data keeps on surprising to the upside, but inflation expectations and CPI readings continue to show disinflation with the last two Core CPI M/M figures coming in at 0.16%.
- The US PMIs missed expectations across the board last week, while the US Jobless Claims remained solid.
- Fed Chair Powell’s speech at the Jackson Hole Symposium was mostly in line with what he said previously but he stressed on the need to be careful going forward and that continued strength in the labour market may require further rate hikes.
- At the moment, the market doesn’t expect another hike from the Fed, but the next NFP and CPI data will be crucial to confirm or change this view.
Canada:
- The BoC hiked rates by 25 bps as expected at the last meeting as the central bank doesn’t like the persistently high underlying inflation with a tight labour market.
- In the recently released Meeting Minutes the BoC seems less in a rush to hike rates again.
- The Canadian underlying inflation data beat expectations on all measures for the June readings and last week we got another beat for the July data.
- On the labour market side, the last report showed that the unemployment rate increased once again, but the average hourly earnings surprised to the upside as well.
- The Canadian Core Retail Sales missed expectations.
- Overall, it’s a mixed picture for the BoC.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD keeps on rallying with almost no pullbacks. The bullish momentum has been relentless, and the pair broke out of many key resistance levels. The next resistance comes at 1.3664 and a break above it would open the door for the 1.3862 level.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair has been diverging with the MACD for a long time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we only got the pullbacks, and we can see that we have a strong upward trendline where we can expect the price to bounce off of next.
In fact, we have a good support level at the trendline as there’s also the confluence with the previous resistance now turned support and the 61.8% Fibonacci retracement level. This is where we can expect the buyers to pile in with a defined risk below the trendline to target a new high. The sellers, on the other hand, will want to see the price breaking below the trendline to confirm a reversal and position for a deeper correction into the 1.34 handle.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have an interesting zone around the 1.36 handle where the price has been struggling to break through except the upward spike during the Fed Chair Powell’s speech at the Jackson Hole Symposium. Therefore, if we see the price breaking above the level, we can expect the buyers to push the pair into the 1.3664 resistance.
Upcoming Events
This week is an important one given that we will see many key labour market data for the US, including the NFP, before the next FOMC meeting. Today, we have the US Consumer Confidence and the US Job Openings reports. Tomorrow, we have the US ADP report. Moving on to Thursday, we will see the US Jobless Claims and the US PCE data. Finally, we conclude the week with the US NFP and the ISM Manufacturing PMI on Friday. Although the Fed keeps all the options on the table, it’s also leaning more towards a pause in September, so we will need strong data to make the market to expect a hike at the upcoming meeting.
