Published on Jun 16, 2023

Daily Analysis For USD/CAD 16-06-2023

USD/CAD Analysis

Key Points: -

· The USD/CAD pair has seen a bounce from its nine-month low, but the recovery lacks significant upward momentum.

· Traders of the Loonie pair are grappling with mixed sentiment and a lack of conviction regarding the divergence between the US Federal Reserve (Fed) and the Bank of Canada (BoC).

· The lackluster performance can be attributed to uncertainty and hesitation among market participants regarding the monetary policies of both central banks. Traders are eagerly awaiting mid-tier economic data releases from both the US and Canada, as they could provide clearer directions for the USD/CAD pair.

· Next week's testimony by Fed Chair Jerome Powell will be a key event to monitor, as his remarks could potentially influence the pair's trajectory.

Today's Scenario: -

The USD/CAD pair is experiencing minor gains at its lowest level since September 2022, which was reached the previous day. The market sentiment remains sluggish on Friday, and the pair is currently trading around 1.3225, having suffered its largest decline in two weeks in the previous session.

The lack of significant movement in the pair can be attributed to mixed concerns regarding the monetary policies of the Bank of Canada (BoC) and the US Federal Reserve (Fed). Although the BoC surprised the markets with a rate hike last week, the Canadian job numbers that followed disappointed those expecting a more aggressive stance from the central bank.

Similarly, the Fed's recent shift towards a more hawkish stance did not receive much acclaim, as the latest US economic data appear mixed. Retail sales for May showed a growth of 0.3%, slightly better than expected, while the core readings met market forecasts. Manufacturing indexes had diverging results, with the NY Fed Empire State Manufacturing Index surpassing expectations, but the Philadelphia Fed Manufacturing Index falling short. Industrial production for May also came in lower than anticipated, and initial jobless claims were higher than expected.

Furthermore, concerns about China and a light economic calendar following the Bank of Japan's decision are contributing to a cautious market sentiment. The WTI crude oil price is experiencing a modest recovery, trading near a one-week high around $70.70.

Looking ahead, important factors to monitor for clearer direction include Canada's wholesale sales for April, the preliminary readings of the US Michigan Consumer Sentiment Index (CSI), and five-year inflation expectations for June. However, significant attention will be focused on the testimony of Fed Chair Jerome Powell next week, particularly after the recent challenges in convincing hawks of the central bank's policy direction.

Diagram of USD/CAD: -

Economic Events: -

Date Event Impact Currency

01:30 (United States) Foreign Bond Investment Low USD

01:30 (United States) Net Long-term TIC Flows Medium USD

01:30 (United States) Overall Net Capital Flows Low USD

04:00 (New Zealand) Business NZ PMI Medium NZD

08:30 (Japan) BoJ Interest Rate Decision High JPY

12:30 (Austria) Inflation Rate MoM Low EUR

12:30 (Austria) Inflation Rate YoY Low EUR

12:30 (Austria) Harmonised Inflation Rate YoY Low EUR

12:30 (Austria) Harmonised Inflation Rate MoM Low EUR

12:30 (Austria) CPI High EUR

12:30 (Slovakia) Harmonised Inflation Rate YoY Low EUR

12:30 (Slovakia) Harmonised Inflation Rate MoM Low EUR

12:30 (United States) Fed Bullard Speech Medium USD

13:30 (European Union) ECOFIN Meeting Medium EUR

13:30 (Italy) Inflation Rate YoY Medium EUR

13:30 (Italy) Harmonised Inflation Rate MoM Low EUR

13:30 (Italy) Harmonised Inflation Rate YoY Low EUR

13:30 (Italy) Inflation Rate MoM Low EUR

13:30 (Italy) CPI High EUR

14:30 (Euro Area) Inflation Rate MoM Low EUR

14:30 (Euro Area) Core Inflation Rate YoY Low EUR

14:30 (Euro Area) Inflation Rate YoY Medium EUR

14:30 (Euro Area) Labour Cost Index YoY Low EUR

14:30 (Euro Area) Wage Growth YoY Low EUR

14:30 (Euro Area) CPI High EUR

14:30 (Malta) Inflation Rate YoY Low EUR

15:30 (Portugal) PPI YoY Low EUR

15:30 (Portugal) PPI MoM Low EUR

17:15 (United States) Fed Waller Speech Medium USD

18:00 (Canada) Foreign Securities Purchases Low CAD

18:00 (Canada) Foreign Securities Purchases by Canadians Low CAD

18:00 (Canada) Wholesale Sales MoM Low CAD

19:30 (United States) Michigan Consumer Sentiment High USD

19:30 (United States) Michigan Inflation Expectations Low USD

19:30 (United States) Michigan Current Conditions Low USD

19:30 (United States) Michigan 5 Year Inflation Expectations Low USD

19:30 (United States) Michigan Consumer Expectations Low USD

22:30 (United States) Baker Hughes Oil Rig Count Low USD

22:30 (United States) Baker Hughes Total Rig Count Low USD

Buy Scenario: -

The USD/CAD pair, which is currently trading at a low level, may experience a corrective bounce towards the bottom reached in February around 1.3265 due to oversold conditions indicated by the Relative Strength Index (RSI). However, for buyers to regain control, it would require a daily close above the previous monthly low around 1.3315. Till we do not advise to buy USD/CAD.

Sell Scenario: -

On the other hand, sellers of the USD/CAD pair may face difficulty in breaking through the resistance zone around 1.3220-1.3205, which represents the tops reached in July and September 2022. These levels present a significant challenge for sellers attempting to push the pair lower. Till we do not advise to sell USD/CAD.