It will be interesting to observe the upcoming macro events from North America. We have the Bank of Canada policy decision and US ISM Non-Manufacturing PMI both at 15:00 BST.
Ahead of these events, the USD/CAD has actually bounced back a little, possibly because of a small pullback in oil prices. Oil has been rallying ahead of the OPEC+ meeting
, supporting oil-linked currencies such as the CAD and NOK.
Macklem begins tenure as BOC Governor
The Bank of Canada is expected to hold fire at this meeting with interest rates likely to be held at 0.25% on the first day of governor Tiff Macklem's tenure. The outgoing governor Stephen Poloz has repeatedly indicated 0.25% is the floor for interest rates. Macklem is unlikely to contributed much in so far as today’s decision is concerned. While Macklem’s views ma not necessarily be portrayed at this meeting’s policy statement, traders will still need to pay closer attention to the bank’s forecasts on the economy over the coming and months, as it could influence near-term policy decisions.
US ADP beats, ISM eyed
In terms of US data, the ADP report was published earlier and there was a fairly muted reaction in FX to the news that the fall in private sector employment for May was 'only' -2.76m vs. -9.0m expected and that previous month was revised to -19.56m from -20.24m. Meanwhile the ISM services PMI is expected to print 44.2 vs. 41.8 last. Watch out for the employment component as this will provide us with a good clue in so far as Friday’s official jobs report is concerned.
USD/CAD looks bearish
From a technical point of view, the USD/CAD looks bearish:
Source: ThinkMarkets and TradingView
Ideed, three months of consolidation ended at the end of May with rates breaking lower. The breakdown has seen a swift move lower in the USD/CAD as the bulls abandoned their positions and new bears stepped in. With the US dollar coming under pressure against other major currencies, and with oil pushing higher, the most likely scenario is we will see more losses for the USD/CAD in the coming days and weeks – unless something changes dramatically from a macro point of view.
Some of the key resistance levels to watch include 1.3570/5 (which was already tested earlier today), followed by 1.3715. These were levels that were previously support. The key long-term resistance to watch is at 1.3860, the base of that breakout at the back end of May.
In terms of support, or potential support, the 200-day moving average, at 1.3460ish, needs to be monitored as the USD/CAD has a tendency to react whenever price nears or tests the average. The gap fill at 1.3420 is the next potential support to watch, followed by the 78.6% Fibonacci retracement at 1.3320.