Forex »The USD / CAD pair to watch this week

Currency Pair of the Week »USD / CAD

With US housing and Canadian CPI data coming this week, the USD / CAD could see some volatility in forex.

The US released CPI data last week for March. The stock was 8.5% YoY from 7.9% YoY in February. With inflation this high, Fed member after Fed member hinted at a 50 basis point hike when the FOMC meets again on May 4th. We recall from the minutes of the meeting that many Fed officials said that one or more increases of 50 basis points could be justified.

Fed leaders will be back in effect this week, including Fed Chairman Powell on Thursday. Forex currency traders will be watching to see if the hawkish rhetoric continues this week. Additionally, the US will release housing data including the NAHB real estate market index, housing commencement, building permits, and existing home sales.

Additionally, weekly 30-year MBA mortgage rates will be published. Last week’s reading was 5.13%. Traders will be looking at the data this week to see if the rise in mortgage rates affected the overall housing market in March.

The US will also release the Beige Book this week, generally without incident. However, the April reading could be looked at more closely as traders look for clues to confirm that the FOMC will rise by 50 basis points on May 4th.

Last week, the Bank of Canada (BOC) raised policy rates by 50 basis points to 1%, as expected. It was the largest increase in more than 20 years and the highest level of interest rates since the pandemic began in March 2020.

Additionally, the Bank of Canada has said it will stop reinvesting the proceeds of its maturing bonds and will then start the process. to reduce your budget. This week, Canada releases the CPI. Did the Bank of Canada make the right choice by raising it by 50 basis points?

Forex currency traders will be keeping an eye on the data release on Wednesday. The main CPI is expected to rise to 6.1% yoy from 5.7% yoy in February.

Core CPI is expected to have risen to 5% yoy from 4.8% yoy in February. Canada will also release retail sales data for February this week.

While the data may be a bit stale, traders will be watching to see if rising inflation has affected the Canadian consumer.

CPI expectations are only 0.2% from 3.2% in January. Non-auto retail sales expectations are equally weak at 0.2% versus 2.5% in January.

The USD / CAD has been trading in the forex range of 1.2454 to 1.2965 since mid-November 2021. On April 5, the price formed a hammer on the daily chart, during which the price opened near 1, 2480, making a false break below the range at a low of 1.2402, and strengthened to close near the open. The USD / CAD rebound has continued and the price is currently consolidating around a confluence zone between 1.2600 and 1.2650, which consists of:

  • A horizontal trend line
  • The 200-day moving average
  • An ascending trend line dated June 1, 2021
  • The 50-day moving average

If the price of the pair USD / CAD above this area, the first resistance is at the April 13th high at 1.2676 and then at the 61.8% Fibonacci retracement level from the March 8th high to the April 5th low near 1.2710 . There, the price has some leeway as the next resistance level will not reach the March 8 highs of 1.2901.

First support is at the low of April 14 at 1.2555, then the lowest of the long-term range at 1.2453. Below, the price may test the April 5th low at 1.2402.

USD / CAD daily chart

Source: Tradingview, Stone X

With US housing and Canadian CPI data coming this week, the USD / CAD could see some volatility in forex. Furthermore, the USD / CAD is currently trading in a confluence zone around 1.2600 and 1.2650. A break in either direction could provide information on the next direction for USD / CAD!

By Joe Perry, CMT, FOREX.com »Official site

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Disclaimer: The information and opinions contained in this report are provided for general information purposes only and do not constitute an offer or solicitation to buy or sell any forex or CFD exchange contracts. Although the information contained herein comes from sources believed to be reliable, the author does not guarantee its accuracy or completeness and assumes no responsibility for any direct, indirect or consequential damages that may arise from anyone who relies on such information.

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