USD / CAD is heading towards the hour meter trendline
- The USD / CAD bulls stepped in to defend the breakout below the hourly uptrend line support.
- The price is about to test the trendline of the hour meter and 10-EMA.
- All eyes are on the BoC, the US CPI and the Fed the following week.
USD / CAD is slightly lower as the North American session moves to 1.2063, in a range of 1.2106 and 1.2057.
Risk appetite was weighed following comments from US Treasury Secretary Yellen over the weekend.
In an interview with Bloomberg, Treasury Secretary Janet Yellen said President Joe Biden should push forward his $ 4 trillion spending plans even if they trigger inflation that persists next year and rates of higher interest.
The comments follow Friday’s slightly weaker-than-expected US non-farm wage data which, combined with such rhetoric, set the tone for the weeks ahead.
There are mixed opinions on the implications of the employment data and Yellen’s comments.
For example, analysts at Brown Brothers Harriman wrote in the note: “We don’t think spending cuts got derailed by the jobs report.”
“Indeed, the data is unlikely to dissuade the Fed from discussing tapering at this meeting and the official statement and minutes should confirm that.”
“That said, the Fed will likely stay in the early stages of these talks and refrain from setting any timetable until the end of the year.”
Looking ahead, with regard to the US dollar, the June 16 Federal Open Market Committee meeting will be in the spotlight where the Fed is expected to declare that substantial progress towards its targets has not been made. .
Beyond that, key dates to watch are the FOMC meetings on July 27-28 and September 21-22, as well as the Jackson Hole Symposium on August 26-28.
However, for the immediate events of the coming week, on the one hand, we have the release of the US Consumer Price Index for May and following last month’s reaction in the forex and rate markets which have looked through the surge in inflation, the same may be true this month.
Such a result would rhyme with Yellen’s weekend comments.
“If we ended up with a slightly higher interest rate environment, it would actually be a plus for the company’s perspective and the Fed’s perspective,” Yellen said Sunday in an interview with Bloomberg. News on his return from the Group of Seven finance ministers. ‘Meet in London.
For two, the Bank of Canada will be the highlight of a quiet week.
If there are no fireworks in Wednesday’s policy statement, traders will instead look to BoC’s Lane in an economic progress report on Thursday for a potential catalyst.
From a positioning perspective, net speculators’ long CAD positions have returned to their highest levels since November 2019, as the market maintains a reasonably hawkish track record for the BoC, Rabobank analysts said.
USD / CAD technical
The USD / CAD is about to test a 38.2% Fibonacci retracement of the previous bearish impulse that aligns with the previous structure and close to the countertrend line which should act as resistance during a breakout. ‘a new test.
That being said, the structure keeps a deeper retracement towards the 61.8% Fibonacci which aligns with the neckline of the M formation.
Either way, they could be the last stop before a further decline, in line with the broader strength of the Canadian dollar.