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USD

  • The Fed left interest rates unchanged as
    expected while dropping the tightening bias in the statement but adding a
    slight pushback against a March rate
    cut.
  • Fed Chair Powell stressed
    that they want to see more evidence of inflation falling back to target and
    that a rate cut in March is not their base case.
  • The US CPI beat
    expectations for the second consecutive month with the disinflationary trend
    reversing.
  • The US PPI beat
    expectations across the board by a big margin.
  • The US Initial Claims beat
    expectations while Continuing Claims missed. Overall, the data remains steady.
  • The ISM Manufacturing
    PMI

    surprised to the upside with the new orders index, which is considered a
    leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat
    expectations across the board with the employment sub-index erasing the prior
    drop and prices paid jumping above 60.
  • The US Retail Sales missed
    expectations across the board by a big margin.
  • The market now expects the first rate cut in June.

CAD

  • The BoC left interest rates unchanged at
    5.00%
    as expected and dropped the language about being prepared to hike if
    needed.
  • The latest Canadian CPI beat expectations across the board with
    the underlying inflation measures remaining elevated.
  • On the labour market side, the latest report beat
    expectations but we saw a contraction in full-time employment and a fall in
    wage growth.
  • The Canadian PMIs improved in
    January although they remain both in contractionary territory.
  • The market expects the first rate
    cut in June.

USDCAD Technical Analysis –
Daily Timeframe

USDCAD Daily

On the daily chart, we can see that USDCAD recently
broke out of the 1.3540 resistance
following the hot US CPI report but failed to sustain the rally as the pair
eventually erased all the gains. The price though made a new higher high so we
have a trendline now
where the buyers should continue to lean onto with a defined risk below it to
position for a rally into the 1.3620 level. The sellers, on the other hand,
will want to see the price breaking lower to invalidate the bullish setup and
increase the bearish bets into the 1.3360 level.

USDCAD Technical Analysis –
4 hour Timeframe

USDCAD 4 hour

On the 4 hour chart, we can see more closely the price
action following the hot US CPI report with the pair now consolidating around
the trendline waiting for a catalyst. There’s not much else to see here so we
need to zoom in to get some more details.

USDCAD Technical Analysis –
1 hour Timeframe

USDCAD 1 hour

On the 1 hour chart, we can see that the
price recently broke above the downward trendline and got rejected from the
previous swing high level. We have now a minor upward trendline where we can expect
the buyers to step in with a defined risk below the major trendline to position
for a break above the 1.3510 level and target a break above the 1.3540
resistance next. The sellers, on the other hand, will want to see the price
breaking below the major trendline to increase the bearish bets into new lows.

Upcoming Events

Today we will see the latest Canadian CPI where the
market will want to see if the disinflationary trend remains intact for the
BoC. Tomorrow, we get the FOMC Meeting Minutes while on Thursday we will have
the Canadian Retail Sales, the US Jobless Claims and the US PMIs.

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