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USDCAD Market Update

2/8/2023 10:51 AM

The USD/CAD pair shows a slight decline, testing 1.3400 for a breakdown. The day before, the US currency showed a negative correction, which allowed the instrument to retreat from the local highs of January 20. The focus of the market remains the speeches of representatives of the US Federal Reserve and the Bank of Canada.

The Chair of the American regulator, Jerome Powell, once again spoke in favor of continuing the policy of tightening monetary conditions, calling this the most effective way to fight inflation. In addition, the official pointed to growing tensions in the US labor market, despite the fact that last Friday there was a strong report from the national Labor Department. Either way, by the end of the year, Powell predicts a moderate rise in the Unemployment Rate to 4.6%.

In turn, Tiff Macklem, Governor of the Bank of Canada, emphasized the importance of following the "hawkish" course, pointing out the existing risks of rising inflation against the backdrop of rising energy prices in world markets and noting that the current situation had an extremely negative impact on the opportunities of households, although some of them were able to accumulate cash reserves during the coronavirus pandemic. The official also stressed that the Bank of Canada needs time to assess how citizens and businesses adjust to a higher interest rate before taking further steps in monetary policy, but also noted the willingness to increase the value even more to bring inflation back to the target level of 2.0%.

At the end of the week, investors are waiting for the publication of the January report on the Canadian labor market. Current forecasts are rather pessimistic and suggest a sharp slowdown in the dynamics of Employment Change from 104.0 thousand to 15.0 thousand, as well as an increase in the Unemployment Rate from 5.0% to 5.1%.

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range is slightly changing, being spacious enough for the current activity level in the market. MACD is growing preserving a weak buy signal (located above the signal line). Stochastic, having approached the level of "80", reversed into a horizontal plane, reacting to the emergence of "bearish" trading dynamics the day before.

Resistance levels: 1.3400, 1.3450, 1.3500, 1.3550. | Support levels: 1.3350, 1.3300, 1.3226, 1.3150.

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