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US:

  • The Fed left interest rates unchanged as
    expected at the last meeting.
  • The macroeconomic projections were revised higher
    as the economy showed much stronger resilience than expected and the Dot Plot
    showed that the majority of members still expects another rate hike by the end
    of the year with less rate cuts in 2024.
  • Fed Chair Powell
    reaffirmed their data dependency but added that they will proceed carefully as
    they are trying to find the optimal level of rates. Powell also added that the
    soft landing is not the base case at the moment, although they are aiming for
    it.
  • The latest US Core PCE
    came
    in line with expectations with disinflation continuing steady.
  • The labour market
    displayed signs of softening although it remains fairly solid as seen also with
    another strong beat in Jobless Claims
    yesterday and with the beat in Job Openings.
  • The ISM Manufacturing PMI beat
    expectations while the ISM Services PMI came in
    line with forecasts in another sign that the US economy remains resilient.
  • The miss in the ADP report led to
    some USD weakness which might continue if the NFP data misses forecasts.
  • The market doesn’t expect the Fed tohike again at
    the moment.

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 data remains strong into the next policy meeting.
  • The Canadian underlying inflation
    data has been beating expectations month after month and last week we got another beat across the board.
  • On the labour market side, the recent
    report showed another uptick in wage growth and this 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

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USDCAD Daily

On the daily chart, we can see that the USDCAD
bounced on the key 1.34 support zone and
shoot higher as Canadian GDP disappointed and Oil prices tumbled. The pair even
broke the key 1.3668 resistance, but this quick rally led to a divergence with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. We might see a pullback into the broken resistance turned support before
continuing higher in a classic “break and retest” pattern. If the price
continues lower, the next stop should be the trendline around
the 1.35 handle.

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USDCAD Technical Analysis –
4 hour Timeframe

USDCAD 4 hour

On the 4 hour chart, we can see that we have a good
support zone around the 1.3668 level where we can also find the 38.2% Fibonacci retracement level
for confluence. That’s
where we can expect the buyers to pile in with a defined risk below the support
to target the 1.3862 level. The sellers, on the other hand, will want to see
the price breaking lower to increase the bearish momentum and position for a
drop into the trendline.

USDCAD Technical Analysis –
1 hour Timeframe

USDCAD 1 hour

On the 1 hour chart, we can see that the
price action after the break above the resistance started to diverge with the
MACD, which might be a sign that we may indeed see at least a pullback into the
support zone.

Upcoming Events

Today it’s all about the NFP report which is the only one the Fed will
see before its next rate decision. The US jobs data going into the NFP was
strong, so the expectations might be skewed to the upside. At the same time, we
will also see the Canadian jobs data with particular focus on wage growth,
which is something the BoC highlighted in recent remarks.

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