The Fed hiked interest rates by 25 bps as expected while keeping the
policy statement basically unchanged. The market was more focused on the
Powell’s press conference to see if he was going to give some forward guidance.
Unfortunately, Fed Chair Powell just repeated that they remain data dependent
and they can either raise or hold at the September meeting. Yesterday though we
got another hot US Jobless Claims report and the USD strengthened
across the board.
On the other hand, the BoC hiked rates by 25 bps as expected at the last meeting as
the central bank doesn’t like the persistently high underlying inflation with a
tight labour market. In the recently released Meeting Minutes the BoC seems less in a rush to
hike rates again. The recent Canadian underlying inflation data beat expectations on all
measures, but the Canadian Retail Sales missed across the board. Overall,
it’s a mixed picture for the BoC and it puts them in a tough position.
USDCAD Technical Analysis –
Daily Timeframe
USDCAD Daily
On the daily chart, we can see that USDCAD has been
stuck in a range just beneath the key 1.3225 resistance for
weeks. The price though started to probe above the resistance yesterday
following the beat in the US Jobless Claims. If the buyers succeed, we are
likely to see the price rallying all the way up to the 1.34 handle, but a
failure to break out might be a bearish signal.
USDCAD Technical Analysis –
4 hour Timeframe
USDCAD 4 hour
On the 4 hour chart, we can see that the recent
consolidation formed an ascending triangle pattern
with the resistance standing at 1.3225. These patterns can break on either
side, but generally what follows is a strong move in the direction of the
breakout.
USDCAD Technical Analysis –
1 hour Timeframe
USDCAD 1 hour
On the 1 hour chart, we can see that a
good support for the buyers would be the one near the 1.3216 level. In fact, we
can find there the 38.2% Fibonacci
retracement level and the red 21 moving average for confluence. The
sellers, on the other hand, will want to see the price breaking below the
support zone to pile in and extend the drop into the black trendline.
Upcoming Events
Today the only notable events will be the US PCE and
ECI reports. The market is likely to focus more on the wages data given that
the PCE is less timely than the CPI, so it would need to surprise to the upside
to generate a meaningful reaction. Anyway, higher than expected ECI should be
bullish for the USD, while lower than expected figure should be bearish in the
short term.