USD/CAD tested a new high for the week but remains tepid.
Canada’s New Housing Price Index declined slightly in January.
Fed’s FOMC meeting Minutes deliver little of note to markets.
USD/CAD briefly tested a fresh high for the week, but the pair continues to churn in near-term consolidation levels as markets buckle down after the latest meeting Minutes from the Federal Reserve’s (Fed) Federal Open Market Committee (FOMC) revealed policymakers remain concerned about a potential flare-up in inflation risks. Market momentum remains thin with US Purchasing Managers Index (PMI) figures due on Thursday, and the trading week will wrap up with the Fed’s latest Monetary Policy Report on Friday.
Canada saw its New Housing Price Index decline in January with the annualized figure softening at a slower rate than previous. Canadian Retail Sales are due on Thursday but are likely to be engulfed by the US PMI prints.
Daily digest market movers: USD/CAD cycles ahead of FOMC with key data around the corner
Canada’s New Housing Price Index declined 0.1% in January MoM versus the previous flat print of 0.0%.
The YoY figure fell 0.7%, less than the previous print of -0.9%.
The Fed acknowledged that rates are very likely at their peak, but the FOMC remains much further away from rate cuts than markets would like as policymakers remain concerned about inflation risks rearing their head once again.
The Fed noted that the US economy remains stronger than initial estimates in December.
The Fed is staunchly waiting for further signs of overall inflation coming down to its 2% target before delivering any rate cuts.
Fed Minutes suggest rates are at their peak
Meanwhile, Richmond Fed President Thomas Barkin hit newswires, noting that while the US is on the “back end” of its inflation problem, there’s still further to go.
Barkin also noted that much of the current declines in inflation have been centered around goods, with services prices remaining problematic for the Fed’s inflation targets.
Fed’s Barkin: Still ways to go to get to a soft landing
Canada’s Retail Sales due on Thursday are expected to rebound with December’s MoM Retail Sales forecast to print at 0.8% versus the previous print of -0.2%.
The US’ S&P Global Manufacturing PMI for February, also slated for Thursday, is expected to tick down to 50.5 from 50.7.
Canadian Dollar price today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the weakest against the Swiss Franc.
USD
EUR
GBP
CAD
AUD
JPY
NZD
CHF
USD
-0.03%
0.00%
-0.11%
0.14%
0.20%
-0.10%
-0.22%
EUR
0.04%
0.04%
-0.06%
0.18%
0.23%
-0.06%
-0.18%
GBP
0.00%
-0.04%
-0.11%
0.13%
0.21%
-0.10%
-0.21%
CAD
0.11%
0.06%
0.10%
0.24%
0.30%
0.00%
-0.11%
AUD
-0.13%
-0.22%
-0.14%
-0.25%
0.06%
-0.24%
-0.36%
JPY
-0.21%
-0.23%
-0.19%
-0.32%
-0.07%
-0.30%
-0.38%
NZD
0.10%
0.06%
0.10%
-0.01%
0.23%
0.30%
-0.12%
CHF
0.21%
0.18%
0.22%
0.11%
0.36%
0.41%
0.12%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Technical analysis: USD/CAD adrift just north of 1.3500
USD/CAD found a little extra room on the high side early Wednesday, touching a new high for the trading week, but the pair remains firmly embedded in near-term technical congestion. The USD/CAD is sticking close to the 1.3500 handle as markets await a firm push in either direction.
The pair finally finished closing last week’s Fair Value Gap (FVG) at 1.3530. The USD/CAD sees a heavy support zone between 1.3480 and 1.3470, just above last week’s Order Block (OB) near 1.3460. Technicals favor a continued bullish break of character, but only if the pair is able to build enough momentum to return to last week’s peak bids near 1.3585.
Daily candles see the USD/CAD continuing to struggle near the 200-day Simple Moving Average (SMA) at 1.3478, but a pattern of higher lows supports a thin push into the bullish side. The USD/CAD is up 2.5% from the last swing low into the 1.3200 handle but still has a ways to go on the high side, still down nearly 3% from last November’s peak near 1.3900.
USD/CAD hourly chart
USD/CAD daily chart
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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