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The Bank of Canada (BOC) is gearing up to make its monetary policy decision in a few!
What might this mean for USD/CAD and its triangle pattern?
Before moving on, ICYMI, yesterday’s watchlist checked out AUD/NZD’s trend channels ahead of Australia’s GDP report. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
New Zealand GDT auction yielded 2.3% drop in dairy prices, following previous 0.5% uptick
U.S. ISM services PMI down from 53.4 to 52.6 vs. 53.0 forecast in February, with jobs component signaling another contraction
U.S. factory orders slumped 3.6% m/m in January vs. estimated 3.1% drop and previous 0.3% decline (downgraded from initial 0.2% increase)
U.S. IBD/TIPP Economic Optimism index down from 44.0 to 43.5 in March vs. estimated 45.2 figure
Australia’s GDP showed that economy grew 0.2% q/q in Q4 2023 as expected, previous reading upgraded from 0.2% expansion to 0.3% growth
Price Action News
Overlay of AUD vs. Major Currencies Chart by TradingView
After an initial bearish reaction to Australia’s GDP report, Aussie pairs managed to pull higher from their intraday lows, except against the Japanese yen.
The economy expanded by 0.2% as expected in Q4 2023, as household spending was bogged down by high interest rates and the rising cost of living.
Still, risk-on flows seem to be propping the commodity currency for the time being, as AUD is advancing against the dollar and franc, as well as its other comdoll peers.
Upcoming Potential Catalysts on the Economic Calendar:
U.K. construction PMI at 9:30 pm GMT
Eurozone retail sales at 10:00 pm GMT
U.S. ADP non-farm employment change at 1:15 pm GMT
U.K. Treasury Budget report coming up
Bank of Canada (BOC) monetary policy decision at 2:45 pm GMT
Canada’s Ivey PMI at 3:00 pm GMT
Fed head Powell’s speech at 3:00 pm GMT
U.S. JOLTS job openings at 3:00 pm GMT
BOC press conference at 3:30 pm GMT
Fed Beige Book at 7:00 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
USD/CAD 15-min Forex Chart by TradingView
USD/CAD has formed higher lows and found resistance near the 1.3600 major psychological mark, creating an ascending triangle that’s been holding so far this month.
Can the upcoming top-tier catalysts from the U.S. and Canada spur a breakout?
And which way might USD/CAD go?
First up is the ADP non-farm employment change report that might show a slight pickup in hiring for February at 149K versus the earlier 107K increase.
Next up is the BOC decision, during which policymakers are widely expected to keep interest rates on hold but signal a shift to a more dovish stance since inflationary pressures have been subsiding recently.
After that we have the Ivey PMI release from Canada that could also have some clues on what the central bank’s next moves might be. After all, weaker inflation and hiring prospects might underscore a potentially downbeat tone from the central bank.
Of course the BOC presser a few hours later is likely to chalk up some moves, too, as officials will likely be asked questions on whether or not they’re considering cutting interest rates at some point.
Any indication that they’re more open to easing later in the year could bring downside for the Loonie, especially if Powell emphasizes their hawkish views.
A break above the 1.3600 handle might be followed by a rally that’s the same height as the pattern or roughly 50 pips. On the other hand, a move below support at S1 (1.3560) could pave the way for a test of S2 (1.3530) next.
In any case, make sure you account for the average USD/CAD volatility when trading this one!
