FX TALKING POINTS:
- USD/CAD[1] Initiates Bearish Sequence Despite Hawkish Fed Rhetoric. Canada Employment Report in Focus.
- AUD/USD[2] Holds Narrow Range as Reserve Bank of Australia (RBA) Endorses Wait-and-See Approach. Relative Strength Index (RSI) Sits at Trendline Resistance.
USD/CAD INITIATES BEARISH SEQUENCE DESPITE HAWKISH FED RHETORIC. CANADA EMPLOYMENT REPORT IN FOCUS.
USD/CAD initiates a fresh series of lower highs & lows even as Federal Reserve officials strike a hawkish outlook for monetary policy, and the rebound from the February-low (1.2247) may continue to unravel amid the failed attempts to break/close above the 1.3130 (61.8% retracement) region.
Fresh comments from Fed Governor Lael Brainard suggest the Federal Open Market Committee[3] (FOMC) will continue to implement higher borrowing-costs over the coming months as unemployment ‘could reach levels not seen in several decades,’ and a growing number of central bank officials may project a neutral Fed Funds rate beyond the 2.75% to 3.00% threshold as ‘the recently enacted fiscal stimulus should boost the economy at a time when it is close to full employment and growing above trend.’ Speculation for an extended hiking-cycle may heighten the appeal of the greenback especially as the Bank of Canada (BoC) remains in no rush to further normalize policy, with USD/CAD at risk of exhibiting a more bullish behavior over the coming months as Governor Stephen Poloz and Co. stick to a wait-and-see approach for monetary policy.
However, another 20.0K expansion in Canada Employment may push the BoC to implement a rate-hike sooner rather than later, and the central bank may strike a more upbeat tone at the next meeting on April 18 should the data prints coming out of the Canadian economy highlight an improved outlook for growth and inflation.
For more in-depth analysis, check out the Q2 Forecast for USD/CAD[4]
USD/CAD DAILY CHART
USD/CAD stands at risk for a larger pullback as it snaps the narrow range from the previous week, with a break/close below the 1.2720 (38.2% retracement) to 1.2770 (38.2% expansion) region bringing the downside targets back on the radar. At the same time, the Relative Strength Index (RSI) appears to be exhibiting a similar dynamic as the oscillator continues to fall back from overbought territory and starts to carve a bearish trend. Next downside hurdle comes in around 1.2620 (50% retracement) followed by the Fibonacci overlap around 1.2440 (23.6% expansion) to 1.2510 (78.6% retracement). AUD/USD HOLDS NARROW RANGE AS RESERVE BANK OF AUSTRALIA (RBA) ENDORSES WAIT-AND-SEE APPROACH.
AUD/USD appears to be stuck in a narrow range as the Reserve Bank of Australia (RBA) endorses a wait-and-see approach for monetary policy, and the recent rebound in the exchange rate may continue to unravel as the central bank tames expectations for a rate-hike in 2018. Even though the
