The miss in the US CPI report led to a sizeable depreciation in the
US Dollar as the market cheered the lower core inflation readings and expected the
Fed to be done soon with its tightening cycle. In fact, the market priced out
the chances of more than one rate hike but kept the July increase as a done
deal. This may be due to the tight labour market, as we have also seen with the
US Jobless Claims yesterday, and the lack of hints to a skip or pause from the
Fed speakers after the CPI release.
The BoC, on the other hand,
hiked rates by 25 bps as expected as the inflation rate continues
to be high, especially the underlying inflation, and the jobs market remains
tight. The BoC Governor Macklem said that the Bank of Canada is prepared to
raise rates further as if they don’t do enough now, they will likely have to do
even more later.
USDCAD Technical Analysis –
Daily Timeframe
On the daily chart, we can see that after the first
fakeout below the key 1.3225 support level,
the price has broken lower again following the miss in the US CPI report and
the rate hike by the BoC. The 1.30 handle is now in sight and the sellers don’t
have strong barriers until then. The moving averages have
again crossed to the downside as the downtrend resumed.
USDCAD Technical Analysis –
4 hour Timeframe
On the 4 hour chart, we can see that the correction
after the fakeout ended at the 50% Fibonacci retracement level
near the 1.34 handle. Since then, the price has started to trend lower as the
US NFP missed expectations and then broke below the bearish flag pattern
to eventually sell off after the miss in the US CPI report.
USDCAD Technical Analysis –
1 hour Timeframe
On the 1 hour chart, we can see that we
have a good resistance zone near the 1.3135 level where we have the confluence of the
38.2% Fibonacci retracement level, the moving average and the trendline. The
sellers are likely to step in here with a defined risk above the trendline and
target the 1.30 handle. The buyers, on the other hand, will want to see the
price breaking higher to pile in and target the 1.3225 resistance.
Upcoming Events
Today
we have the University of Michigan Consumer Sentiment report. The market is
likely to move only if there are big deviations from the expected figures and
it’s likely to be particularly focused on the inflation expectations data.
See also the video below:
This article was written by FL Contributors at www.forexlive.com. Source