Daily Forex News and Watchlist: USD/CAD

Still looking for USD trades for the FOMC event?

We’re taking a closer look at USD/CAD’s potential short-term resistance today!

Before moving on, ICYMI, yesterday’s watchlist checked out AUD/USD’s short-term trend line support ahead of Australia’s quarterly CPI report. Be sure to check out if it’s still a good play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

BOJ’s January Opinions Summary showed talks about exiting easy policies, with one member saying that “conditions for policy revision, including the termination of the negative interest rate policy, are being met” and another noting that “Now is a golden opportunity” to take advantage of the other central banks’ policy shifts

Japan’s preliminary industrial production in December: 1.8% m/m (2.5% forecast, -0.9% previous)

Japan’s retail sales dropped by 2.9% m/m in December, weaker than -0.2% estimates and offsetting November’s 1.1% gain; Annual retail sales: 2.1% y/y (5.0% forecast, 5.4% previous)

ANZ: New Zealand’s business confidence improved from 33.2 to 36.6 in January; Inflation expectations dipped from 4.61% to 4.28% (lowest since Nov 2021); “The RBNZ has done enough”; “Businesses also expect the worst is past”

Australia’s CPI in Q4 raised RBA rate cut bets: 0.6% q/q (0.8% forecast, 1.2% previous); Annual rate at 3.4% y/y (3.7% forecast, 4.3% previous); RBA’s trimmed mean CPI at 0.8% q/q (0.9% forecast, 1.2% previous)

Australia’s Treasurer Jim Chalmers posted on X: “We are making very welcome and encouraging progress in the fight against inflation…but this is not mission accomplished because we know people are still under pressure.

China’s NBS manufacturing PMI improved from 49.0 to 49.2 in January and marked its fourth monthly contraction; Non-manufacturing PMI rose from 50.4 to 50.7

Japan’s consumer confidence index improved from 37.2 to a two-year high of 38.0 in January as inflation eased

Japan’s housing starts for December: -4.0% y/y (-6.6% forecast, -8.5% previous)

Lloyds Bank U.K. Business Barometer rose 9 points to 44%, the biggest increase since August and the highest since February 2022, thanks in part to easing inflation and rate cut bets

Germany’s import prices for December: -1.1% m/m (-0.6% forecast, -0.1% previous)

Germany’s retail sales for December: -1.6% m/m (0.6% forecast, -2.5% previous)

U.K.’s Nationwide house price index in January: 0.7% m/m (0.1% forecast, 0.0% previous); Annual house price growth improved from -1.8% to -0.2% in January, the strongest since January 2023

Switzerland’s retail sales for December: -0.8% y/y (0.9% forecast, -1.5% previous)

France’s preliminary CPI for January: -0.2% m/m (0.0% forecast, 0.1% previous); Annual rate at 3.4% y/y (4.1% previous)

Price Action News

Overlay of AUD vs. Major Currencies

Overlay of AUD vs. Major Currencies Chart by TradingView

Cooler-than-expected quarterly CPI reports from Australia brought the bears to AUD’s yard today as traders priced in increased chances of a Reserve Bank of Australia (RBA) interest rate cut sooner than later.

AUD lost pips across the board and lost as much as 0.60% against its counterparts before interest rate cut speculations translated to overall risk-taking in the markets.

The risk-friendly trading environment turned things around for AUD, which has halved its intraday losses but is still trading in the red across the board.

Upcoming Potential Catalysts on the Economic Calendar:

Credit Suisse Switzerland economic expectations at 9:00 am GMT
Italy’s unemployment rate at 9:00 am GMT
U.S. ADP report at 1:15 pm GMT
Canada’s monthly GDP at 1:30 pm GMT
U.S. quarterly employment cost index at 1:30 pm GMT
U.S. EIA crude oil inventories at 3:30 pm GMT
FOMC statement at 7:00 pm GMT and presser at 7:30 pm GMT
Australia’s building approvals at 12:30 am GMT (Feb 1)
Australia’s NAB quarterly business confidence at 12:30 am GMT (Feb 1)
China’s Caixin manufacturing PMI at 1:45 am GMT (Feb 1)

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action!  ️

USD/CAD 15-min Forex

USD/CAD 15-min Forex Chart by TradingView

I don’t know if you’ve noticed but USD/CAD has been making lower highs and lower lows since last week after the pair found resistance at the 1.3530 previous high.

USD/CAD is currently trading near 1.3425 after enough FX bulls pushed the pair higher from the 1.3400 psychological level.

Are we looking at a better opportunity to short USD/CAD?

Later today, the Fed members will drop their January monetary policy decisions. While no one is expecting monetary policy changes from Chairman Powell and his team, many are at the edge of their seats to see if JPow will  ̶e̶n̶a̶b̶l̶e̶ not speak against March interest rate cut bets.

If we don’t see language cautioning against March rate cut speculations, then USD could lose pips against its counterparts. The oil-related Loonie, which is receiving extra boost from higher crude oil prices, could attract more buyers.

In the event of a USD-bearish trading environment, USD/CAD may turn lower from its technical resistance area. As you can see, the 1.3425 – 1.3450 area is close to the R1 (1.3430) Pivot Point line as well as the descending channel resistance in the 15-minute time frame.

USD selling with technical triggers has better odds of drawing in enough sellers to drag USD/CAD to the 1.3410 Pivot Point line if not the 1.3400 psychological handle.

As the FOMC Statement Event Guide suggests, though, it’s probably better to book profits ahead of other potential catalysts that may affect USD’s prices.

What do you think? Will USD/CAD extend its downtrend today?

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