The Canadian dollar to watch in forex this week

The Canadian dollar to watch in forex this week


The Canadian dollar to watch in forex this week

With weaker US data lately and the Bank of Canada meeting on Wednesday, the Canadian dollar and the USD/CAD pair could be volatile in forex this week.

The Fed is entering its “blackout period” ahead of next week’s FOMC meeting. Yet in the weeks leading up to it, Fed speakers are getting a lot more hawkish pampering than they had in 2022. Even the most hawkish members of the Fed have toned it down at the moment. approaching next week.

Using the CME FedWatch tool, traders know that prices have a 99% chance that a house with a base of 25 points will drive the Fed Funds price down to 4.75%. One of the reasons for the easing of hawkish rhetoric is that US inflation data has been relatively soft year-to-date.

Average hourly earnings for December were 0.3%, plus November’s print was revised to 0.4% from 0.6%. In contrast, December’s CPI fell from 0.1% to -0.1%.

This was the first negative print since May 2020! Other economic data was also weaker, encouraging markets to believe the Fed might be heading for a soft landing. The ISM non-manufacturing PMI is 49.6, the first reading after May 50, 2020.

Others tell us that Factory Orders, Industrial Production, Manufacturing Production, the NY Empire State Manufacturing Index and the Philadelphia Fed Manufacturing Index were all negative. Retail sales were also worse than expected!

The United States also released the Fed’s favorite inflation measure, the Core PCE, this week. Due to weaker inflation data, as well as weaker manufacturing and retail sales data, the US dollar and yields declined while stocks rose.


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This week, the Bank of Canada will have the opportunity to decide whether to raise interest rates or leave them unchanged. The Bank of Canada was the first to raise interest rates and slow the pace of increases. Table traders currently have an 80% chance that a 25 basis point house will bring either 4.50% daily.

The Canadian dollar to watch in forex this week

The CPI print for December fell from 6.8% YoY to 6.3% YoY. However, similar to the CPI print in the US, the focus was on the monthly print which fell -0.6% from a previous reading of 0.1%.

This is the biggest drop since April 2020!

December employment data was strong. Canada added 104,000 new jobs to the economy against a total of 8,000 jobs. Which made the employment data even stronger: 84,500 of those jobs were full-time jobs!

And is there any chance that the Bank of Canada will leave exchange rates due to lower inflation, but with stronger jobs?

the pair USD/CAD The rise from the aggressive forex trend in September 2022 and to a recent high on October 13, 2022 at 1.3978. USD/CAD then turned, forming a head and shoulders with a target near 1.3010. However, I support you to hold the price at 1.3226.

The price of the USD/CAD pair then rebounded in mid-November to reach the 61.8% Fibonacci retracement level from the October 13 highs to the November 16 lows near 1.3690.

Resistance has established an AB=CD pattern, where the length from A to B equals the length from C to D. So far, the USD/CAD pair is trading in the right direction. Could the pair reach the target near 1.2950 with a hawkish Bank of Canada and a stronger Canadian dollar?

USD/CAD daily chart

forex canadian dollar usd/cad 23 january 2023
Source: Tradingview, Pierre X

On the 4-hour chart, the USD/CAD parity is trading in an area between 1.3321 and 1.3521 for a large part of January.

If the parity goes below the zone, the next support is the low of November 15, 2022 at 1.3226, then the 200-day moving average (see daily chart) at 1.3190. Below, support is not up to the round number psychological support level at 1.3000.

However, if the AB=CD level does not materialize, the first level of resistance is the most mobile 50-day before 1.3499. Above, the price may witness the January 19th highs at 1.3521 and then the highs of the previous move at 1.2705.

USD/CAD 4 hour chart

forex canadian dollar 23012023
Source: Tradingview, Pierre X

With weaker US data lately and the Bank of Canada meeting on Wednesday, the Canadian dollar and the USD/CAD pair could be volatile in forex this week.

If the Bank of Canada does not rise or is extremely dovish, the price could break above 1.3690. However, if the Bank of Canada is hawkish, the pair could get close to the target of the AB=CD pattern quickly. Manage risk accordingly.

By Joe Perry, CMT, FOREX.com » Official Site

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Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or solicitation to buy or sell forex cambio contracts or CFDs. Although the information contained in the document comes from sources believed to be reliable, the author does not guarantee its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages which may result in a breach.




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