Mon, April 15, 2024

Key Events to Sway USD/CAD: BOC Holds at 5%

dollar, usd/cad-american-canadian-dollars

Quick Look

  • Upcoming speeches from FOMC members and the Fed Vice Chair could sway market sentiments.
  • Key economic data releases from the US and Canada, including employment figures and PMI reports, are set to influence the USD/CAD pair.
  • BOC is expected to hold the interest rate steady at 5.0% amidst global economic cues.
  • Technical analysis signals a potential bearish reversal for USD/CAD, targeting 1.3366.
  • Recent economic indicators show US manufacturing sector contraction, while Canadian manufacturing PMI indicates a slight improvement.

The forex market braces for a week packed with significant economic events. FOMC Member Harker’s speech is high on the agenda, expected to provide insights into the Federal Reserve’s future monetary policy direction. With the US economic data releases, including the ISM Non-Manufacturing Survey and Durable Orders, investors will gauge the economy’s health. Attention will also turn to Fed Vice Chair Barr’s speech, potentially offering clues on interest rate trajectories.

Mid-week, the spotlight shifts to the ADP Employment Figures, a precursor to the Nonfarm Payrolls (NFP), hinting at the labour market’s strength. At the same time, the Bank of Canada (BOC) will announce its interest rate decision, widely anticipated to remain at 5.0%. Jerome Powell’s testimony and the JOLTS Job Openings and Canada’s Ivey PMI report could lead to increased volatility in the USD/CAD currency pair.

Bearish USD/CAD Targeting 1.3366

The USD/CAD pair exhibits a bullish trend but faces resistance, marking a challenging period since mid-January. A bearish divergence between the price and RSI(14), alongside a potential rising wedge pattern, signals a loss of momentum. Such technical formations suggest a bearish reversal could be imminent, with a projected target near 1.3366, aligning with the lower 1-month implied volatility band.

PMI Contrasts: U.S. Shows Contraction, While Canada Improves Slightly

Despite the uptrend, the USD/CAD pair climbed to near 1.3560, unaffected by rising crude oil prices, following OPEC+’s decision to maintain output cuts. This resilience underscores the complex interplay between commodity prices and currency valuations.

Canada’s manufacturing sector shows signs of steadiness, with the PMI inching closer to the expansionary threshold. This contrasts with the US manufacturing PMI’s contraction, highlighting divergent economic conditions.

Moreover, amidst consolidating DXY and improving Treasury yields, the US dollar’s dynamics reflect a cautious market stance. Investors remain wary of Federal Reserve officials’ hints against premature rate cuts, balancing optimism with pragmatic economic assessments.

Volatile USD/CAD: Key Data’s Impact

Investors remain vigilant as markets navigate through a week of critical economic data and policy announcements. The anticipated speeches, employment figures, and PMI reports will likely shape the short-term trajectory of the USD/CAD currency pair. Market participants brace for a week of strategic recalibrations with technical analysis pointing towards a potential bearish reversal and mixed economic indicators.

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