It’s another brief but still busy trading week!
We have the BOC statement, the FOMC meeting minutes, high level US data, namely the CPI and retail sales numbers.
Before all of that, I wrote ICYMI A quick recap of market topics That pushed the currency pairs last week. check it!
And now for the potential market movers being watched closely on this week’s economic calendar:
Major economic events:
Key and core US figures for the Consumer Price Index (Apr 12, 12:30PM GMT) – First, we have official Uncle Sam CPI reports on deck, and they will likely provide further guidance on what the Fed may do next.
Headline inflation is expected to slow from 0.4% m/m in February to just 0.2% in March, effectively lowering the annual rate from 6.0% to 5.2%. Meanwhile, the core version of the report is expected to drop from 0.5% to 0.4%.
Bank of Canada monetary policy statement (April 12, 2:00pm GMT) – The Bank of Canada is due to announce its policy decision in the middle of the week and is widely expected to keep interest rates on hold at 4.50%.
This scenario has long been priced in by markets, as policymakers actually sat down at the previous meeting and signaled a longer pause in tightening for the time being.
However, their economic outlook for the next few months may generate a stronger reaction from the Loonie pairs, so watch out for pressure at 3:00pm GMT as well.
Minutes of the Federal Open Market Committee meeting (April 12, 6:00 PM GMT) – In its March policy statement, the Fed decided to raise interest rates another 0.25% from 4.75% to 5.00% to take into account banking sector concerns while still trying to keep price pressures in check. .
The transcript of their latest meeting should provide more insight into how concerned the committee members are when it comes to the recent liquidity shake-up, as well as the slowdown in hiring and inflation.
However, keep in mind that the latest batch of mostly pessimistic jobs indicators and PMI readings came after the March meeting, so any hawkish statements may be treated with a grain of salt.
Australia Employment Report (April 13, 1:30am GMT) – After a surprisingly strong headline jobs number for February, the Land Down Under may report a small decline in employment for March.
Analysts expect to see an increase of 21.2K in employment for the month, down from the previous increase of 64.6K. The unemployment rate is set to rise from 3.5% to 3.6% as well.
US retail sales (April 14, 12:30pm GMT) – Another drop in consumer spending is expected for March, as headline retail sales figures may show a monthly decline of 0.5% while the core reading may report a decline of -0.4%.
This could mark a sharper drop in spending, after a 0.4% decline in headline retail sales and a 0.1% drop in the core figure for February. Weaker-than-expected results could dampen the Fed’s hawkish hopes.
Forex setup for the week: US dollars / Canadian dollars
USD/CAD 1-hour chart by TradingView
Since it will be a busy week for both the USD and the CAD, I am hoping for more volatility in USD/CAD.
Will the sales continue?
The pair is currently correcting from its most recent slide, with the price rising near the 38.2% Fibonacci retracement level as seen on the hourly time frame.
Technical indicators indicate a continuation of the slide, as the 100 SMA is below the 200 SMA, while the Stochastic is moving south.
I still look forward to a bigger correction near the BoC decision, although a very dovish statement or a sudden rate cut could lead to a sharp rally for this pair.
In this case, USD/CAD could test the higher retracement levels, which is likely to be Fibonacci 61.8% that lines up with the previous support area at 1.3660.
Of course major economic stimulus out of the US is likely to prompt some action as well, as downbeat CPI and retail sales results could seal the deal for a pause in the Fed hike very soon.
If so, we may see USD/CAD slide back to the swing low near the 1.3400 handle later!