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 latest US Core PCE came
  in line with forecasts with the disinflationary progress continuing
  steady.
• The labour market has been showing signs of
  weakening lately but last week we got some strong releases with the US Jobless Claims and the NFP coming
  in strongly.
• The latest ISM Manufacturing
  PMI
  missed expectations falling further into contraction, while the ISM Services PMI beat
  forecasts holding on in expansion.
• The University of
  Michigan Consumer Sentiment survey came in much better than
  expected with inflation expectations tumbling.
• The hawkish Fed members recently shifted
  their stance to a more neutral position.
• The market expects the Fed to start cutting rates
  in Q2 2024.

CAD

• The BoC kept the interest rate steady at
  5.00% as expected with the usual caveat that
  it’s prepared to raise the policy rate further if needed.
• BoC Governor Macklem recently has been leaning on a more
  neutral side as inflation continues to abate.
• 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 USDCAD pulled
back into the downward trendline where we
had also the confluence with the
50% Fibonacci retracement level
and the red 21 moving average. That’s
where the sellers stepped in with a defined risk above the trendline to
position for another drop into the swing low at 1.3382. The bias remains
bearish as long as the price stays below the trendline, so the buyers will need
the price to break higher to start targeting new higher highs.

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 the pullback into the trendline where the price
got rejected from. The moving averages crossover suggests that the pullback
might have ended, and we are now heading to new lows with the target for the
sellers standing at the 1.3382 level.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
had another divergence with the MACD right into the key resistance zone
and the trendline before the fall. We have now a key support around the 1.3550
level where the price has been bouncing from for several times without breaking
below it. This consolidation between the trendline and the 1.3550 support is
forming a descending
triangle. The price can break on either side of the pattern,
but what follows next is generally a strong and sustained trend in the
direction of the breakout.

Upcoming Events

This week is going to be a big one with the US CPI and
the FOMC rate decision on the agenda. We begin today with the release of the US
CPI report where the market will want to see how the disinflationary trend is
going. Tomorrow, we have the US PPI data followed by the FOMC rate decision
where the Fed is expected to keep interest rates unchanged. On Thursday, we
will see the US Retail Sales and Jobless Claims figures, while on Friday we
conclude the week with the US PMIs.

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