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.
• Inflation measures
  since then showed further disinflation.
• The labour market
  displayed signs of softening although it remains fairly solid.
• Overall, the economic data started to surprise to
  the downside lately.
• Last week the ISM Services PMI and Jobless Claims
  surprised to the upside.
• The Fed members are leaning more towards a pause in
  September.
• The market doesn’t expect the Fed to hike at the September
  meeting, but there’s now 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 the 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 USDCAD
eventually got rejected from the key 1.3664 resistance and
pulled back into the upward trendline where we
have also the red 21 moving average for confluence. This is
where we can expect the buyers to step in with a defined risk below the
trendline to position for a breakout of the resistance and a rally into the
1.3862 level. The sellers, on the other hand, will want to see the price
breaking below the trendline to pile in and extend the fall into the 1.34
handle.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we have a
massive divergence with the
MACD going on
from the beginning of August. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. In this case, we kept on getting the
pullbacks with the buyers buying the dips, but one negative catalyst for the
USD and we might see a quick turnaround. The price is now trading around a key
support where we have the trendline and the 61.8% Fibonacci retracement level
for confluence. This is a strong area for the buyers, so if the price falls
below the support, the bullish setup would be invalidated, and the sellers will
regain control.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
recently got another divergence right at the 1.3664 resistance that ended up in
a reversal that brought the price into the support zone. More conservative
buyers may want to wait for the price to break above the resistance zone around
the 1.36 handle before piling in for another rally.

Upcoming Events

This week we have many important events beginning with
the US CPI tomorrow, which is expected to show an increase in headline
inflation but further disinflation in the core measure. On Thursday, we will
see the latest US Jobless Claims, PPI and Retail Sales data. Finally on Friday,
we get the University of Michigan Consumer Sentiment report.

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