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 recent US CPI 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 pretty resilient but there are some signs of softness as seen yesterday with another miss in Continuing Claims.
- The US Retail Sales last week beat expectations by a big margin with positive revisions to the prior figures, suggesting the consumers’ spending is still solid.
- The US PMIs this week showed that the economy now looks more balanced and resilient.
- Fed Chair Powelland other FOMC members continue to highlight the rise in long term yields as doing the job for the Fed and therefore they are expected to keep rates steady in November as well.
- 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 less hawkish speech in the press conference compared to his previous remarks.
- The Canadian CPI last week missed across the board and the underlying inflation measures eased, which was a welcome development for the BoC.
- On the labour market side, the last 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 anymore.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the USDCAD pair has almost reached the 1.3862 high following the negative risk sentiment that favoured the USD and the less hawkish BoC that weakened the CAD. We can notice that the pair has been diverging with the MACD trading into the high, which is a sign of a weakening momentum, and the price is now a bit overstretched as depicted by the distance from the blue 8 moving average. This is where we can expect the sellers to step in with a defined risk above the high to position for a pullback into the upward trendline.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the buyers will have a much better risk to reward setup around the 1.3750 level where we can find the upward trendline and the Fibonacci retracement levels for confluence. 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 major trendline around the 1.36 handle.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is indeed starting to lose momentum as the moving averages crossed to the downside. If the price makes one last rally into the 1.3862, the sellers will have a much better risk to reward setup and will pile in with more conviction. Alternatively, we can expect them to increase the bearish momentum into the trendline if the price breaks below the recent swing low around the 1.3790 level.
Upcoming Events
Todaywe will get the US PCE report which is unlikely to change anything for the Fed at this point in time.
