Daily Analysis For USD/CAD  16-06-2023

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.


Support and Resistance Level: -

 Support              Resistance  

 S1 1.3172   -     R1 1.3316

 S2 1.3118  -      R2 1.3408

 S3 1.3027  -      R3 1.3461


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