Despite some top tier events on the session for both the Loonie and Greenback, traders kept the range intact on USD/CAD. Will it continue to hold?
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Fresh Market Headlines & Economic data:
- Bank of Canada maintains overnight rate target at 1.75%
- Fed’s Powell says trade, global growth concerns continue to weigh on U.S. economy
- China’s producer prices stall in June, fueling fears of deflation
- UK GDP grows 0.3% in May as car production rebounds from pre-Brexit shutdowns
- The UK economy is on course to contract by 0.1% in the second quarter of 2019
- The forecast for euro area GDP growth in 2019 remains unchanged at 1.2%, while the forecast for 2020 has been lowered slightly to 1.4%
- EU Commission nominee to defend Irish backstop in Brexit
- New Zealand Food prices fell 0.7 percent in June 2019
- Japan producer prices fall 0.1%
- Oil gains on U.S. inventory drawdown, Gulf of Mexico storm
- U.S. and Iran set to clash at U.N. nuclear watchdog
- $13,000: Bitcoin Price Jumps 30% in 8-Day Gains; What’s Behind the Recovery?
Upcoming Potential Catalysts on the Forex Calendar:
- BoE’s Tenreyro speaks in London at 6:10 pm GMT
- Fed’s Bullard to speak at Washington University at 6:30 pm GMT
- FOMC meeting minutes at 7:00 pm GMT
- Australian home loans at 2:30 am GMT (July 11)
- Japan Tertiary Industry Activity Index at 5:30 am GMT (July 11)
- China FDI, New loans, & M2 money supply (tentative July 11)
- German CPI at 7:00 am GMT (July 11)
- BOE Financial Stability Report at 10:30 am GMT (July 11)
- ECB Monetary Policy meeting accounts at 12:30 pm GMT (July 11)
- U.S CPI & unemployment claims at 1:30 pm GMT (July 11)
- Canada House price index at 1:30 pm GMT (July 11)
What to Watch: USD/CAD
We just saw two top tier catalysts for USD/CAD this morning, Fed Chair Jerome Powell’s signal that rate cuts are coming and the Bank of Canada’s latest decision to hold the interest rate steady at 1.75%. The outcomes of both events ended up pretty much as the markets expected, which is likely the reason why we saw no real directional movement in USD/CAD.
Looking forward, we still have top tier events ahead within the next session or two, most notably the upcoming FOMC meeting minutes (will there be hints of a 25 or 50 bps rate cut?) and the U.S. CPI update. Geopolitical tensions are likely to be a factor as well with the U.S. and Iran situation being a relative factor for oil prices and the Loonie.
So, if you’re a bull on USD/CAD and looking for a breakout above the minor resistance area around 1.3135, look for a scenario where FOMC meeting minutes is relatively more supportive of just a 25 bps cut or no cut and/or U.S. CPI data surprises with an faster than expected rate of growth in prices. This scenario is likely to give the bulls the courage to break higher, especially if oil prices weaken, and with the next possible resistance area being the major psychological level of 1.3200, a good potential short-term return-on-risk.
If you’re a bear on USD/CAD, the likelier scenario of a dovish tone from the meeting minutes and a downtick in the U.S. CPI number may bring in more short-term selling, and a break of the minor support area around 1.3050 would likely draw in medium to longer-term momentum players back into the recent shift to the downside over the previous month in USD/CAD.