The Bank of Canada (BOC) held the rates at 5% yesterday, as expected. The Canadian economy appears to be cooling off, with the CPI retreating below 3% in January and the PMI, despite the recent recovery, still below 50, indicating a decline in activity. Additionally, wage pressures have shown some early signs of easing. However, there are some strong points as well. The fourth-quarter aThe Bank of Canada (BOC) held the rates at 5% yesterday, as expected. The Canadian economy appears to be cooling off, with the CPI retreating below 3% in January and the PMI, despite the recent recovery, still below 50, indicating a decline in activity. nnualized GDP exceeded expectations with 1% growth, and December retail sales showed a 0.9% increase.
The market is pricing in a rate cut in the summer, possibly in June or July, with a total of three cuts expected in 2024.
(USDCAD Daily Chart)
USDCAD may experience upward pressure over the medium term due to stronger US fundamentals. However, in the short term, the dollar index is losing momentum, which could lead USDCAD lower. If the short-term green ascending wedge formation breaks, the price might resume its movement towards the white trendline. Nevertheless, if the current fundamentals remain unchanged, the uptrend may persist even if the short-term wedge breaks.
Regarding upward movements, Fibonacci retracement levels can serve as local resistances, with the key level being at 1.39. Below the 1.39 resistance, the medium-term technical outlook begins to resemble an ascending triangle, which could be interpreted as bullish as long as the white trendline holds.
Tomorrow, both the US and Canada will release their jobs reports simultaneously, potentially causing high volatility. USDCAD might decide whether to break the wedge formation downwards or ignore it and move towards the Fibonacci levels following the release of these data.
