The weather is cooling off in Canada but the currency has heated up.

USD/CAD fell to a four-month low today despite some US dollar strength elsewhere. Bank of Canada governor Tiff Macklem helped along the move as he pushed back against rate cut talk.

„We have not started having that discussion (about cutting rates), because it’s too early to have that discussion. We’re still discussing whether we raised interest rates enough and how long they need to stay where they are,“ he said.

He did offer a nod that „conditions increasingly appear to be in place to get us (to 2% inflation“ but the loonie stayed strong.

Housing is a big risk to the Canadian economy in the months ahead as mortgages continue to renew but market-driven rates are down significantly and that diminishes the odds of a hard landing while also putting some money back in Canadians‘ pockets.

This week, RBC released its monthly spending tracker that showed Black Friday holiday spending was
up 7% from year-ago
levels. In November as a whole, they noted strong sales at clothing stores and an increase in retail sales overall, even after adjusting for inflation.

A potential tailwind for the loonie next year would be a soft landing combined with stimulus from China. That could meaningfully push up commodity prices and improve Canada’s terms of trade.

For now, I don’t think you can fight the momentum in the Canadian dollar. It rose on Friday despite softness in equities and a general ‚risk off‘ trade. Flows are going to dominate into year end but economic sentiment is improving and that should send USD/CAD down to 1.32.

This article was written by Adam Button at www.forexlive.com.

• German inflation slowdown is good news
• It’s too early to consider ECB cuts

The slowdown in Europe compared to the US has been stark in the past few months. It’s clear the economies are on different paths, even if Lagarde is loathe to acknowledge it.

This article was written by Adam Button at www.forexlive.com.

One of the low-lights of Donald Trump’s presidency when it came to markets was when he autographed a chart of the Dow Jones Industrial Average and sent it to Lou Dobs, highlighting a 1985 point rise.

That was on March 13, 2020, just as the pandemic was kicking off.

The next trading day the index fell 2352 and continued to fall another 20% from there.

The market has a way of humbling even the most-powerful people.

Now it’s Biden that’s testing the market gods with a tweet touting the record highs in the stock market.

This article was written by Adam Button at www.forexlive.com.

Crude oil futures are settling at $71.43. That’s down -$0.15 or -0.21%.

For the trading week, the price is little change at +0.25%. The low for the week reached $67.71. The high for the week was up at $72.56.

Looking at the weekly chart below, the price traded this week above and below the 200-week moving average at $70.43 (green line in the chart below). However, momentum could not be maintained, and the price rotated back above the moving average level for the second week in a row. Of note is that the low prices did stay above the May and June lows which bottomed near $67.

This article was written by Greg Michalowski at www.forexlive.com.

A more dovish Fed has been a tailwind for risk trades and even after some late profit-taking yesterday, it doesn’t dull the shine from earlier in the week. European indices are maintaining a good mood today with the DAX and CAC 40 both having hit fresh record highs during the week and US indices are also at the highs for the year.

The S&P 500 is on course for a seventh straight week of gains, up 2.5% this week, and during that run, the index has gained by nearly 15%:

It is now less than 2% away from a fresh record high with futures pointing to a 0.3% gain at the moment ahead of the open later.

Despite there being notable headwinds for the global economy and the inflation monster not quite defeated just yet, stocks are on their way to scale to new heights once more. If you ever need more evidence that the stock market is not the economy, this would be it.

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

USD

• The Fed left interest rates unchanged as expected 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, which implies a rate cut coming soon.
• The US CPI this week came in line with expectations
  with the disinflationary progress continuing steady. This was also confirmed by
  the US PPI the day after where the data missed
  estimates.
• The labour market has been showing signs of
  weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming
  in strongly.
• The latest ISM Manufacturing PMI missed expectations falling further into
  contraction, while the ISM Services PMI beat forecasts holding on in expansion.
• The market expects the Fed to start cutting rates
  in Q1 2024.

AUD

• The
  RBA left interest rates unchanged as expected at the last meeting with
  the central bank maintaining the usual data dependent language.
• The
  recent Monthly CPI report missed expectations across
  the board which is a welcome development for the RBA.
• The
  RBA Governor Bullock has been leaning on a more hawkish side recently, although
  she remains optimistic on the future outlook.
• The
  latest labour market report beat forecasts across the
  board although the unemployment rate rose more than expected.
• The
  wage price index surprised to the upside as wage
  growth in Australia remains strong.
• The
  recent Australian PMIs fell further into contraction for
  both the Manufacturing and Services sectors.
• The
  market expects the RBA to start cutting rates in Q4 2024.

AUDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that AUDUSD recently
broke above the key trendline
following the surprisingly dovish FOMC meeting. This has opened the door for a
rally into the 0.68 resistance where we
can expect the sellers to step in with a defined risk above the level to target
a drop back into the 0.65 support.

AUDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair
started to consolidate just above the recent high at the 0.6680 level. This is
where the buyers are piling in with a defined risk below the level to position
for another rally into the 0.68 handle. 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 the 0.65 support.

AUDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the rangebound price action between the 0.6680 support and the 0.6730
resistance. This gives us a clear playbook as a break to the upside should lead
to a rally into the 0.68 handle, while a break to the downside could trigger a
selloff into the 0.65 support.

Upcoming Events

Today the only notable event on the agenda is the
release of the US PMIs.

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

The euro area trade surplus widened slightly in October as exports grew by 0.6% while imports declined by 0.2% on the month, both on a seasonally adjusted basis. Comparing the year-to-date data, exports were seen down 0.2% while imports are down some 12.7% on an unadjusted basis compared to the January to October period last year.

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

• Majority said there are risks to the upside on inflation
• For most of us, core inflation is what we are looking at
• Wouldn’t say we are at terminal rate but the chance has increased

They still want to leave the door open to further tightening but given prevailing circumstances, everyone knows that they are done already. The only thing is that they can’t declare victory on the inflation front just yet, hence the ongoing rhetoric i.e. no pivot.

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

USD

• The Fed left interest rates unchanged as expected 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, which implies a rate cut coming soon.
• The US CPI this week came in line with expectations
  with the disinflationary progress continuing steady. This was also confirmed by
  the US PPI the day after where the data missed
  estimates.
• The labour market has been showing signs of
  weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming
  in strongly.
• The latest ISM Manufacturing PMI missed expectations falling further into
  contraction, while the ISM Services PMI beat forecasts holding on in expansion.
• The market expects the Fed to start cutting rates
  in Q1 2024.

CAD

• The BoC kept the interest rate steady at
  5.00% as expected 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 as inflation continues to abate.
• The recent Canadian CPI missed expectations across the
  board and the underlying inflation measures eased, which was a welcome
  development for the BoC.
• On the labour market side, the latest report beat expectations
  although the unemployment rate ticked higher again.
• The market expects the BoC to start
  cutting rates in Q2 2024.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD rejected
the trendline and sold
off as the Fed came out surprisingly dovish. The pair has now reached the key
swing low at 1.3382 where we can expect the buyers to step in with a defined
risk below the level to position for a rally into the trendline. We can also
notice that the price is a bit overstretched to the downside as depicted by the
distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we recently
got a fakeout above the trendline, which is generally a reversal signal, and as
soon as the price fell below the support at
1.3550, the sellers piled in aggressively supported by the dovish Fed. From a
risk management perspective, the sellers would be better off waiting for a
pullback after such a strong and quick selloff. The probable resistances will
be the 1.35 handle and the trendline.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is starting to diverge with
the MACD right
at the key swing low level. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. This should be another layer of
confluence for the buyers with the first target coming in at 1.35.

Upcoming Events

Today the only notable event on the agenda is the
release of the US PMIs.

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

• Prior 5.25%
• Bank rate vote 6-3 vs 6-3 expected (Greene, Haskel, Mann voted to raise by 25 bps)
• Statement details to follow..

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