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 PCE missed expectations across the board with
  the Core 6-month annualised rate falling below the Fed’s target at 1.9%.
• The NFP report beat
  expectations although there was more weakness under the hood.
• 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 Q1 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 Q2 2024.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD rallied
all the way back to the key trendline around
the 1.34 handle where we can also find the confluence with the
red 21 moving average and the
50% Fibonacci retracement level.
This is where the sellers are piling in with a defined risk above the trendline
to position for a drop into new lows. The buyers, on the other hand, will want
to see the price breaking higher to invalidate the bearish setup and position
for a rally into the 1.36 handle.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the latest leg
higher into the trendline diverged with the
MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, it’s another layer of confluence for the sellers and
increases the chances of seeing another drop from these levels. If the price
breaks below the upward counter-trendline, we can expect the sellers to
increase their bearish bets into new lows.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action with the pair now compressed between the
downward and upward trendlines. This gives us a clear setup:

• A break above the 1.34 handle should lead
  to a rally into the 1.36 handle next.
• A break below the downward trendline is
  likely to trigger a selloff into new lows.

Upcoming Events

This week is basically empty on the data front with the
only two notable releases scheduled for Thursday when we will get the US CPI
report and the US Jobless Claims figures, and then we conclude the week with
the US PPI data on Friday.

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

This is the 24th straight month that the index remains below the 50-year moving average of 98. NFIB notes that small businesses remain very pessimistic about the outlook coming into this year, with 23% of firms reporting inflation to be their single-most important problem in business operations – up 1% from November. Adding that while 2023 is now „in the rearview mirror, it will weigh heavily on the
2024 economy“.

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

There’s not much in terms of action so far in European morning trade, with the market moves so far looking rather tentative at best. 10-year Treasury yields are holding steady at around 4.04% after the drop yesterday and that is keeping traders on edge today:

The limiting factor so far looks to be the 200-day moving average (blue line) but also the 23.6 Fib retracement level from the swing lower since the end of October to December. That is the first key hurdle for bond sellers to break through in order to validate further the recent bounce in yields to start the new year.

As yields keep steadier today, the dollar is also finding itself in a similar position. USD/JPY is down slightly by 0.2% to 143.90 but it has been weaving in and around the 144.00 mark so far in European trading. Besides that, EUR/USD is flat at 1.0945 and GBP/USD down 0.1% to 1.2735.

Looking at the commodity currencies, AUD/USD is down 0.2% to 0.6700 despite a stronger Australian retail sales report here. However, the data comes with a big caveat amid a boost from the Black Friday sales.

In the equities space, stocks are also not really following through on the gains yesterday – at least not yet. S&P 500 futures are down 0.3% and European indices are also slightly lower so far on the day. That isn’t leaving much for risk trades to work with on the session as such.

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

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   • Google Search Volume: 59.645M.

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🔍 Investment Considerations:

• BETS: High interest on Google, but remember to dig deep before diving in!
• LMDX: Decline could be a warning, but check those fundamentals first.
• GOEV: Positive vibes, but look beyond the hype to the long-term view.
• VINC: Enthusiasm is high, but balance it with a solid understanding of the company.
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📚 Remember, folks: past performance doesn’t guarantee future results. Always do your homework! 📝

🎉 Happy Investing! 🎉

🚨 Disclaimer: This isn’t investment advice. Always do your own research before making any investment decisions. Stay informed, stay smart with forexlive.com! 🧠💡

This article was written by Itai Levitan at www.forexlive.com.

• Prior 6.5%

The euro area jobless rate actually ticked lower in November and that continues to reaffirm that labour market conditions are very much holding up despite the economic slowdown in the region.

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

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

It was down by about 16 points earlier in the session but has since recovered to near flat levels. That has also seen European indices trim losses as well but it remains to be seen if dip buyers are really showing up with much conviction at the moment.

We’ve seen these bounces a few times already last week but ultimately, stocks still came under pressure in Wall Street trading. The only positive today is that bond yields are not really racing much higher amid a struggle in broader market appetite. 10-year Treasury yields are still flat at 4.043% at the moment.

Going back to stocks and the overall outlook for this week, it could really be a tale of two halves. One before the US CPI data and one after the data release. For now, we’re still caught by the pullback from last week but things could really turn around on a softer set of inflation numbers on Thursday.

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

There is that feeling that price pressures might end up becoming fairly sticky at around the 3% mark in Europe, especially after the December numbers here. Le Maire is mainly just doing some politicking here as he has always done, so I wouldn’t read too much into the above remark.

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

• Prior +0.1%; revised to +0.4%
• Retail sales -1.1% vs -1.5% y/y expected
• Prior -1.2%; revised to -0.8%

The monthly reading matches estimates, although it comes after a positive revision to the October reading. Here is the breakdown of the retail sales for the month:

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

The Eurostoxx is now down 0.5%, DAX down 0.5%, and CAC 40 down 0.6% on the day. Meanwhile, S&P 500 futures are also struggling and falling to session lows – down 0.4% on the day:

The selling from last week is continuing, even as bond yields are putting on a more tepid showing so far in European morning trade. 10-year Treasury yields are lightly changed at 4.045% at the moment.

But for equities, the story seems to be that traders and investors are still taking a breather after the new year. In the case of US stocks, last week’s decline was the first after nine straight weeks of gains. So, the declines for now are still nothing too impactful.

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