US:

• The Fed hiked by 25 bps as
  expected and kept everything unchanged at the last meeting.
• Fed Chair Powell reaffirmed their data dependency
  and kept all the options on the table.
• The US CPI last
  week came in line with expectations, so the market’s pricing remained roughly
  the same.
• The labour market
  displayed signs of softening although it remains fairly solid.
• The other important economic data like the ISM
  Services PMI, Jobless Claims and Retail Sales all beat expectations recently.
• The Fed members are leaning towards a pause in
  September and the next decision will still be dictated by the economic data.
• The market doesn’t expect the Fed to hike at the
  September meeting, but there’s now basically a 50/50 chance of a hike in
  November.

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 beat expectations on all measures for the June readings and recently we
  got another beat for the July data.
• 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 again, but we still have lots of data before the next meeting.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that since tapping
into the key 1.3668 resistance, the
USDCAD pair has been moving lower almost every single day. Given the
overstretched levels and the divergence with the
MACD right at
the resistance, a pullback was to be expected, but the recent break of the
higher low at 1.3489 and the crossover of the moving averages brings
into question the overall trend.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we had a
massive divergence with the MACD since the beginning of August that culminated
at the key resistance. The pair is now threatening a break of the higher low at
1.3489 where we can also find the 38.2% Fibonacci retracement level of
the entire rally into the 1.3668 resistance. The sellers have been in complete
control since the strong Canadian wage growth data and recently leant on the
red 21 moving average to position for further downside. Lower than expected
inflation figures today might invalidate the breakout and push the pair to the
upside again. A break below the Fibonacci level though, should see another
selloff into the 1.34 support.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have another divergence with the MACD right at the support zone. This might be
a signal that we are about to see a turnaround, but the price will need to
break above the trendline to confirm a reversal. A break of the trendline should
see more buyers piling in and increase the bullish momentum with the 1.3668
resistance being the first target.

Upcoming Events

This week has just a couple of important economic
releases with the FOMC rate decision tomorrow being the highlight. Today, we
will see the latest Canadian CPI with the market likely focusing more on the
core measures since that’s what the BoC is more concerned with. Tomorrow, the
Fed is expected to keep rates unchanged, and the market will focus more on the
Dot Plot and Fed Chair Powell’s press conference, although he’s likely to
repeat that they remain data dependent. Moving on to Thursday, we will see
another US Jobless Claims report, while on Friday we conclude the week with the
US PMIs data.

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