Daily Analysis For USD/CAD  15-06-2023

Daily Analysis For USD/CAD 15-06-2023

USD/CAD Analysis


Key Points: -


·       The USD/CAD pair is encountering strong resistance around the 1.3350 level as the upside momentum of the USD Index shows signs of exhaustion.


·       Although the market initially reacted with optimism to the Federal Reserve's decision to pause its rate-hiking cycle, the mood turned cautious due to the central bank's hawkish interest rate guidance.


·       The Canadian Dollar is expected to experience some volatility following the release of the monthly Manufacturing Sales data.


Today's Scenario: -


In the early European session, the USD/CAD pair encountered selling pressure near the immediate resistance level of 1.3350. Despite the Federal Reserve's plans for additional interest rate hikes that would maintain the policy divergence between the US central bank and other global banks, the Canadian Dollar has been losing strength.


The decline in S&P500 futures during the Asian session has carried over to Europe, as the initial optimism sparked by the Federal Reserve's decision to pause its rate hikes has been offset by caution arising from the central bank's hawkish interest rate guidance.


Earlier, the US Dollar Index (DXY) recovered all its losses and climbed above 103.30 after Fed Chair Jerome Powell confirmed that more interest rate hikes are on the horizon. However, the US Dollar is now struggling to maintain its strength. It is important to note that while headline inflation in the United States has softened, core inflation remains persistent due to tight labor market conditions.


In his monetary policy statement, Fed Chair Powell mentioned, "Not seeing a lot of progress on core PCE inflation" and expressed the desire to see a decisive downward movement in core PCE.


The Fed's hawkish dot plot has impacted the demand for US government bonds, resulting in a significant rise in the 10-year US Treasury yields to around 3.83%.


The Canadian Dollar is expected to experience some volatility following the release of Canada's monthly Manufacturing Sales data for April. Economic data suggests a contraction of 0.2%, compared to the previous expansion of 0.7%. Higher interest rates implemented by the Bank of Canada (BoC) have led firms to underutilize their production capacity, resulting in a reduction in overall factory activity.


In the oil market, prices have shown a recovery after a correction to around $68.00, partly influenced by the USD Index meeting resistance. It is noteworthy that Canada is the primary exporter of oil to the US, and an increase in oil prices would strengthen the Canadian Dollar.


Diagram of USD/CAD: -


Economic Events: -


Date      Event                                                                                            Impact        Currency

0:00      (United States) Fed Press Conference                                              High  USD

4:15      (New Zealand) GDP Growth Rate YoY                                         Medium NZD

4:15      (New Zealand) GDP Growth Rate QoQ                                       Medium NZD

5:20      (Japan) Foreign Bond Investment                                       Low  JPY

5:20      (Japan) Stock Investment by Foreigners                                           Low  JPY

5:20      (Japan) Machinery Orders YoY                                                   Medium   JPY

5:20      (Japan) Machinery Orders MoM                                               Medium   JPY

5:20      (Japan) Imports YoY                                                                           Low     JPY

5:20      (Japan) Balance of Trade                                                    High    JPY

5:20      (Japan) Exports YoY                                                                    Medium     JPY

5:30      (Euro Area) Eurogroup Meeting                                                Medium   EUR

7:00      (Australia) Consumer Inflation Expectations                      Low AUD

7:00      (Australia) Part Time Employment Chg                                      Medium AUD

7:00      (Australia) Participation Rate                                                             Low   AUD

7:00      (Australia) Full Time Employment Chg                                       Medium AUD

7:00      (Australia) Unemployment Rate                                                       High   AUD

7:00      (Australia) Employment Change                                                       High   AUD

7:00      (Australia) RBA Bulletin                                                              Medium    AUD

7:00      (China) PBoC 1-Year MLF Announcement                         Low CNY

7:00      (China) House Price Index YoY                                                     Medium  CNY

7:30      (China) Unemployment Rate                                                            High   CNY

7:30      (China) Retail Sales YoY                                                                      High    CNY

7:30      (China) Industrial Production YoY                                       High CNY

7:30      (China) Fixed Asset Investment (YTD) YoY                   Medium CNY

9:05      (Japan) 3-Month Bill Auction                                                              Low  JPY

10:00    (Japan) Tertiary Industry Index MoM                                                  Low JPY

10:00    (Netherlands) Unemployment Rate                                Medium EUR

10:30    (Finland) GDP YoY                                                                                 Low   EUR

12:00    (Switzerland) Producer & Import Prices MoM                                  Low CHF

12:00    (Switzerland) Producer & Import Prices YoY                       Low CHF

12:15    (France) Inflation Rate MoM                                                      Medium   EUR

12:15    (France) Inflation Rate YoY                                                         Medium   EUR

12:15    (France) Harmonised Inflation Rate MoM                         Low EUR

12:15    (France) Harmonised Inflation Rate YoY                                           Low  EUR

13:30    (Spain) Balance of Trade                                                             Medium    EUR

14:10    (Spain) Obligacion Auction                                                    Low   EUR

14:10    (Spain) Bonos Auction                                                                        Low    EUR

14:30    (Euro Area) Balance of Trade                                                      Medium  EUR

14:30    (France) 5-Year OAT Auction                                                               Low  EUR

14:30    (France) 3-Year OAT Auction                                                               Low  EUR

14:30    (Greece) Construction Output YoY                                      Low EUR

14:30    (Montenegro) Inflation Rate YoY                                                       Low   EUR

14:30    (Montenegro) Harmonised Inflation Rate YoY                                  Low EUR

14:30    (Montenegro) Inflation Rate MoM                                     Low  EUR

15:00    (Belgium) Construction Output YoY                                     Low  EUR

15:30    (France) 10-Year Index-Linked OAT Auction                       Low EUR

15:30    (Ireland) Balance of Trade                                                    Low   EUR

16:00    (Portugal) Economic Activity YoY                                                      Low   EUR

16:00    (Portugal) Private Consumption YoY                                                  Low EUR

17:45    (Canada) Housing Starts                                                              Medium   CAD

17:45    (Euro Area) ECB Interest Rate Decision                                            High  EUR

17:45    (Euro Area) Marginal Lending Rate                                     Low  EUR

17:45    (Euro Area) Deposit Facility Rate                                                      High   EUR

18:00    (Canada) Manufacturing Sales MoM                                                Low  CAD

18:00    (United States) Import Prices YoY                                       Low  USD

18:00    (United States) Export Prices YoY                                       Low  USD

18:00    (United States) Import Prices MoM                               Medium USD

18:00    (United States) Export Prices MoM                             Medium  USD

18:00    (United States) NY Empire State Manufacturing Index              Medium USD

18:00    (United States) Retail Sales YoY                                                       High    USD

18:00    (United States) Retail Sales Ex Autos MoM                      High USD

18:00    (United States) Retail Sales MoM                                      High  USD

18:00    (United States) Philly Fed Business Conditions                                Low USD

18:00    (United States) Philly Fed Employment                                            Low  USD

18:00    (United States) Philly Fed CAPEX Index                                             Low  USD

18:00    (United States) Philly Fed Prices Paid                                                Low  USD

18:00    (United States) Philly Fed New Orders                                              Low  USD

18:00    (United States) Philadelphia Fed Manufacturing Index              Medium             USD

18:00    (United States) Jobless Claims 4-week Average                              High USD

18:00    (United States) Continuing Jobless Claims                        High USD

18:00    (United States) Initial Jobless Claims                                                High  USD

18:00    (United States) Retail Sales Ex Gas/Autos MoM                             High USD

18:15    (Euro Area) ECB Press Conference                                     High  EUR

18:30    (Belgium) Balance of Trade                                                                Low    EUR

18:30    (Kosovo) GDP Growth Rate YoY                                                        Low    EUR

18:45    (United States) Capacity Utilization                                     Low  USD

18:45    (United States) Manufacturing Production YoY                               Low USD

18:45    (United States) Industrial Production YoY                  Medium USD

18:45    (United States) Industrial Production MoM               Medium USD

18:45    (United States) Manufacturing Production MoM                            Low USD

19:30    (United States) Business Inventories MoM                Medium USD

19:30    (United States) Retail Inventories Ex Autos MoM                            Low USD

20:00    (United States) EIA Natural Gas Stocks Change                                Low USD

21:00    (United States) 8-Week Bill Auction                                     Low  USD

21:00    (United States) 4-Week Bill Auction                                     Low  USD

21:05    (United Kingdom) BoE Cunliffe Speech                                             Low  GBP

21:30    (Canada) 2-Year Bond Auction                                                          Low    CAD

21:30    (United States) 15-Year Mortgage Rate                                            Low  USD

21:30    (United States) 30-Year Mortgage Rate                                            Low  USD


Buy Scenario: -


The pair is currently extending its upward movement, breaking out of a descending trend channel that formed on June 5. The bullish momentum is supported by positive MACD signals and the RSI (14) line hovering around the 50.0 level.


However, it's important to acknowledge that the top line of the mentioned bullish channel, around 1.3350 at present, poses a challenge for further advances in the USD/CAD pair.


If the pair manages to break above this level, the 50-day Simple Moving Average (SMA), located near 1.3365, and a previous support line that dates back two months, around 1.3390, will be the next levels to watch. Ultimately, the 1.3400 round figure will serve as a strong resistance, defending against further gains for USD/CAD bears.  Till we do not advise to buy USD/CAD.


Sell Scenario: -


On the downside, the immediate support for the USD/CAD pair is found at the 1.3300 round figure, followed by the bottom line of the descending trend channel, currently around 1.3265.


It's worth noting that the yearly low around 1.3260 acts as an additional barrier before potentially directing USD/CAD bears towards the November 2022 low of approximately 1.3225. Till we do not advise to sell USD/CAD.


Support and Resistance Level: -

 Support              Resistance  

 S1 1.3280   -     R1 1.3361

 S2 1.3236  -      R2 1.3397

 S3 1.3199  -      R3 1.3442


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