As the global economic landscape continues to evolve, several key events and data releases this week are poised to impact the markets. The US Consumer Price Index (CPI) and Producer Price Index (PPI) will offer insights into inflation trends, while the Bank of Canada's interest rate decision will be closely watched amid ongoing trade tensions. Additionally, US unemployment claims and the UK's GDP figures will provide further indications of economic health.
In the technical analysis section, we'll delve into the recent performance of USDCAD, which has been on an upward trend since mid-February. We'll also outline potential upside and downside targets for traders, along with a discussion on the fundamentals driving market sentiment.
Overview
As the global economic landscape continues to evolve, several key events and data releases this week are poised to impact the markets. The US Consumer Price Index (CPI) and Producer Price Index (PPI) will offer insights into inflation trends, while the Bank of Canada's interest rate decision will be closely watched amid ongoing trade tensions. Additionally, US unemployment claims and the UK's GDP figures will provide further indications of economic health.
In the technical analysis section, we'll delve into the recent performance of USDCAD, which has been on an upward trend since mid-February. We'll also outline potential upside and downside targets for traders, along with a discussion on the fundamentals driving market sentiment.
Key Economic Events
Wednesday 14:30 (GMT+2) - USA: CPI m/m (USD)
Wednesday 15:45 (GMT+2) - Canada: Overnight Rate (CAD)
Thursday 14:30 (GMT+2) - USA: PPI m/m (USD)
Thursday 14:30 (GMT+2) - USA: Unemployment Claims (USD)
Friday 09:00 am (GMT+2) - UK: GDP m/m (GBP)
Technical Analysis
Following a low of 1.41499 on February 14, USDCAD has surged by over 2.5%, establishing a pattern of higher highs and higher lows indicative of an upward trend. The initial turnaround was prompted by a Tower Bottom candlestick formation, propelling prices above the 50-period Exponential Moving Average (EMA). This movement reinforced bullish sentiment and highlighted growing buying interest.
Moreover, the Momentum oscillator ascended above the 100 threshold, and the Relative Strength Index (RSI) has consistently remained above 50, underscoring sustained buying pressure. However, a failure-swing reversal has yet to materialize. The trough at 1.42385 did not dip below the preceding trough, but prices have yet to surpass the peak at 1.45422 to confirm the uptrend.
The confirmation of the failure-swing reversal would indicate the possibility of a continued upward trajectory reinforcing the ongoing uptrend, providing further confidence in the bullish sentiment and sustained buying pressure observed thus far.
Potential Upside Targets
Should the bulls maintain market control, traders may direct their attention toward the four potential res stance levels below:
1.45422: The initial resistance is 1.45422, which represents the peak marked March 4.
1.46887: The second price target is identified at 1.46887, corresponding to the weekly resistance, R2, estimated using the standard Pivot Points methodology.
1.47920: The third target is established at 1.47920, aligning with the daily high reached on February 3.
1.48352: An additional price target is estimated at 1.48352, which corresponds to the weekly resistance, R3, calculated using the standard Pivot Points methodology.
Potential Downside Targets
Should the sellers take market control, traders may consider the four potential support levels listed below:
1.43952: The first level of support is identified at 1.43952, representing the 38.2% Fibonacci Retracement drawn from 1.47920 to 1.41499.
1.42385: The second support level is 1.42385, reflecting the daily low from March 6.
1.41499: The third support level is identified at 1.41499, corresponding to the trough marked February 14.
1.40813: An additional downward target is observed at 1.40813, corresponding to the weekly support, S2, calculated using the standard Pivot Points methodology.
Fundamentals
The Bank of Canada is expected to cut interest rates for the seventh consecutive meeting due to the economic impact of a trade war initiated by US President Donald Trump. Economists predict the policy interest rate will be reduced to 2.75%, the lowest since September 2022. The ongoing tariff battle, which includes significant levies on Canadian goods, has led to economic uncertainty and potential recession. Despite a stronger-than-expected rebound in the Canadian economy, the central bank aims to mitigate the economic damage caused by the trade war through continued rate cuts. However, Governor Tiff Macklem acknowledges the limitations of monetary policy in addressing the issue.
Conclusion
To conclude, the upcoming week presents a series of pivotal economic events and data releases that are expected to shape market dynamics significantly. Key indicators such as the US CPI, PPI, and unemployment claims, along with the UK's GDP figures, will provide valuable insights into inflation trends and economic health. Furthermore, the Bank of Canada's interest rate decision, influenced by ongoing trade tensions, will be closely scrutinized for its impact on the economy.
In the technical analysis section, USDCAD's upward trend since mid-February is examined, highlighting potential upside and downside targets for traders. The market's trajectory will be guided by both technical signals and fundamental drivers, emphasizing the importance of monitoring these developments closely.
As we navigate through this complex economic landscape, staying informed and adaptable will be crucial for making well-informed trading decisions.