Current trend

The USD/CAD pair trades at 1.3658 during the Asian session, correcting against the long-term upward trend for the third week.

In the report following the Bank of Canada’s monetary policy meeting, officials noted the resumption of economic growth in the first quarter after a pause in the second half of 2023, although the pace of the upward dynamics of 1.7% fell short of the April forecast. However, experts agreed that spending remained stable despite the 2.9% growth in final domestic demand, as consumption accelerated 3.0% on the back of strong purchases of cars and some services, and business investment beat the preliminary estimates in April and contributed to economic growth, as did investment in housing construction and exports. The development of the labor market was in line with estimates. The pressure on the sector eases, but the number of new jobs is increasing more slowly than the number of working-age people. The 4.0% wage growth along with poor productivity confirms that unit labor costs continue to grow at an above-average rate. Among other things, the regulator’s economists agreed that the measures taken are restraining activity and slowing the pace of inflation. However, the May consumer price index adjusted from 0.5% to 0.6% MoM and from 2.7% to 2.9% YoY, against forecasts of 0.3% and 2.6%, respectively, and the core indicator reached 0.6% and 1.8%, respectively, compared with 0.2% and 1.6% previously. Thus, Bank of Canada officials may decide to tighten monetary policy as early as the next meeting.

Tomorrow at 14:30 (GMT 2), the personal consumption expenditure price index is due. The May core indicator may change from 2.8% to 2.6% YoY and from 0.2% to 0.1% MoM, and the main indicator from 2.7% to 2.6% and from 0.3% to 0.0%, respectively, which will be another argument for the US Fed to switch to the “dovish” rhetoric at the September meeting.

Support and resistance

The trading instrument has been correcting downwards against the long-term upward trend for the third week. After the breakdown of the resistance zone of 1.3610–1.3585 (Murrey level [3/8], Fibonacci correction 38.2%), the negative dynamics may continue to the area of ​​1.3488 (Murrey level [1/8]), 1.3427 (Murrey level [0/8], Fibonacci correction 61.8%). In case of a breakout of the key “bullish” middle line of Bollinger bands 1.3700, the asset may reach the area of ​​1.3793 (Murrey level [6/8]), 1.3855 (Murrey level [7/8]).

Technical indicators do not give a single signal. Bollinger Bands are moving horizontally, the MACD histogram is preparing to move into the negative zone, and Stochastic is leaving the oversold zone.

Resistance levels: 1.3700, 1.3793, 1.3855.

Support levels: 1.3585, 1.3488, 1.3427.

Trading tips

Short positions may be opened below 1.3585, with the targets at 1.3488, 1.3427 and stop loss 1.3650. Implementation period: 5–7 days.

Long positions may be opened above 1.3700, with the targets at 1.3793, 1.3855, and stop loss 1.3645.