USD

• The Fed left interest rates unchanged as expected at the last meeting with a shift in
  the statement that indicated the end of the tightening cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t push back against the strong dovish pricing
  and even said that they are focused on not making the mistake of holding rates
  high for too long.
• The latest US CPI slightly beat expectations but analysts
  expect the Core PCE to print at 0.2% M/M again following the CPI data.
• The US PPI missed expectations across the board
  supporting the disinflationary impulse.
• The labour market continues to soften although Initial Claims keep on hovering around cycle lows while
  Continuing Claims are ranging at a higher level.
• The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
• The hawkish Fed members have been leaning
  on a more neutral side lately.
• The market expects the Fed to start cutting rates
  in March 2024.

CAD

• The BoC kept the interest rate steady at
  5.00% as expected at the last meeting with
  the usual caveat that it’s prepared to raise the policy rate further if needed.
• BoC Governor Macklem recently has been leaning on a more
  neutral side and even started to talk about rate cuts although he remains
  uncertain on the timing.
• The latest Canadian CPI beat expectations across the board with
  the underlying inflation measures remaining elevated, which should give the BoC
  a reason to wait for more data before considering rate cuts.
• On the labour market side, the latest report missed
  expectations although wage growth spiked to the highest level since 2021.
• The Canadian PMIs continue to fall
  further into contraction as the economy keeps on weakening amid restrictive
  monetary policy.
• The market expects the BoC to start
  cutting rates in March 2024.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD broke
through the key trendline and
extended the rally into the 1.35 handle. This breakout opened the door for a
move into the swing high resistance around
the 1.36 handle. The buyers will look for dip-buying opportunities on the lower
timeframes while the sellers will want to see the momentum changing before
piling in more aggressively.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we have an
upward trendline now that will define the current uptrend. From a risk
management perspective, the buyers will have a much better risk to reward setup
around the trendline where they will also find the red 21 moving average for confluence. The sellers,
on the other hand, will want to see the price breaking lower to invalidate the
bullish setup and position for a drop into new lows.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have another minor trendline that should offer a good support for the buyers with
the red 21 moving average for extra confluence. If the price were to break
lower, the sellers will pile in and target the major upward trendline around
the 1.34 handle.

Upcoming Events

Today, we have the Canadian CPI report on the agenda
and later in the day all eyes will be on Fed’s Waller as the market will be
eager to see if he decides to pushback against the aggressive rate cuts
expectations. Tomorrow, we will get the US Retail Sales report while on
Thursday we will see the latest US Jobless Claims figures. On Friday, we
conclude the week with the Canadian Retail Sales data and the University of
Michigan Consumer Sentiment survey.

This article was written by FL Contributors at www.forexlive.com.

• Chinese economy has rebounded and moved upward
• Economy had estimated growth of 5.2% in 2023, higher than target of 5%
• Economy is making steady progress, can handle ups and downs in its performance
• Overall trend of long-term growth has not changed

When it comes to China, typically whatever number that is touted by top officials will be the certified statistical figure at the end of the day. And I don’t expect this to be any different, especially with Li making such remarks amid an international audience in Davos. In any case, there are big challenges for the Chinese economy looking to this year, with deflationary pressures and the fallout from the property market crisis still reverberating.

This article was written by Justin Low at www.forexlive.com.

• Prior 12.8
• Current conditions -77.3 vs -77.0 expected
• Prior -77.1
• Expectations 15.2
• Prior 12.8

The reading marks an improvement in German economic sentiment, with the expectations reading showing yet another decent bump higher. ZEW notes that the more upbeat take is due to more than half of the respondents assuming the ECB will cut interest rates in the first half of this year. Adding to that is two-thirds of respondents also anticipating rate cuts by the Fed in the next six months as well.

This article was written by Justin Low at www.forexlive.com.

The epicenter is one that strikes on land, though the maximum seismic intensity is 5- this time around (the town of Shika is the one most impacted). It’s been two weeks already and still, there is ongoing earthquakes and aftershocks hitting the Western Japan region so far in the new year. This one isn’t of much impact but it is something to at least be informed about just in case. From before:

• Magnitude 7.6 earthquake hits Japan
• Aftershocks continue in Ishikawa as magnitude 4.6 earthquake reported
• Magnitude 6.0 earthquake reported in Western Japan region

This article was written by Justin Low at www.forexlive.com.