USD

• The Fed left interest rates unchanged as
  expected at the last meeting with basically no change to the statement.
• Fed Chair Powell stressed
  once again that they are proceeding carefully as the full effects of policy
  tightening have yet to be felt.
• The US Core PCE last
  week came in line with forecasts with the disinflationary progress continuing
  steady.
• The labour market is starting to show weakness as Continuing Claims are now
  rising at a fast pace and the recent NFP report
  missed across the board.
• The ISM Manufacturing
  PMI
  last week missed expectations falling further into contraction.
• The recent US Consumer
  Confidence report beat expectations although the
  details about the labour market continued to weaken.
• The hawkish Fed members recently shifted
  their stance to a more neutral position.
• The market expects the Fed to start cutting rates
  as soon as Q1 2024.

CAD

• The BoC left interest rates at 5.00% as expected at the last meeting 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 recent Canadian CPI missed expectations across the
  board and the underlying inflation measures eased, which was a welcome
  development for the BoC.
• On the labour market side, the latest report beat expectations
  although the unemployment rate ticked higher again.
• The market expects the BoC to start
  cutting rates in Q2 2024.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that since the break
below the key trendline, the USDCAD
pair just kept on selling off supported by the weakening US data and the
aggressive rate cut pricing for the Fed. The target for the sellers should be
the swing low around the 1.3382 level, but the trend might reverse if the data
starts to roll off faster and we get a strong risk off sentiment across the
board, so that will be something to watch out for.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, 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. In this case, we got a pullback into the minor trendline around the
1.3565 level where the sellers are likely to lean onto to position for another
drop into new lows. If the price breaks higher though, the buyers should pile
in to target a correction into the major trendline around the 1.3640 level
where we can also find the confluence with the
50% Fibonacci retracement level.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is breaking above the minor trendline and we should see the buyers starting
to pile in to target the 1.3640 resistance. The sellers, on the other hand,
will want to see the breakout fail with the price falling below the
counter-trendline to step in more aggressively and take the pair into new lows.

Upcoming Events

This week we will see lots of US labour
market data culminating with the NFP release on Friday. Today, we have the ISM
Services PMI and the US Job Openings reports. Tomorrow, we will get the US ADP
data and the BoC rate decision, where the central bank is expected to keep
rates steady. On Thursday, it will be the time for the US Jobless Claims
figures, while on Friday we conclude the week with the NFP report.

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