USD/CAD analysis on July 2, 2024
On Tuesday, USD/CAD rose moderately, updating local highs from June 18 and testing the level of 1.3750 for an upward breakout. Activity on the instrument remains high despite the fact that the macroeconomic background from the United States does not contribute to an upward movement.
Statistics on the personal consumption expenditure price index were in line with analysts' forecasts, so the market reaction was restrained. In May, the base index decreased from 2.8% to 2.6% in annual terms and from 0.3% to 0.1% on a monthly basis, while the broader index adjusted from 2.7% to 2.6% and from 0.3% to 0.0%. These data did not affect expectations of an interest rate cut by the US Federal Reserve. It is likely that the local driver for the regulator's decision will be the June labor market report, which will be released on Friday. Traders expect that the number of new jobs outside the agricultural sector will decrease from 272.0 thousand to 195.0 thousand, the average hourly wage will slow down from 4.1% to 3.9% in annual terms and from 0.4% to 0.3% monthly, and the unemployment rate will remain at 4.0%. Tomorrow, the minutes of the Fed's June meeting will be published, which will clarify the sentiments of FOMC members regarding the prospects for rate cuts. Analysts expect the first rate cut of 25 basis points in September.
A report on the Canadian labor market will also be released on Friday. Forecasts suggest a moderate slowdown in employment growth in June from 26.7 thousand to 22.5 thousand, the unemployment rate may rise from 6.2% to 6.3%, and the average hourly wage will be 5.0-5.2%.
On the daily chart, the Bollinger band indicator is trying to turn into a horizontal plane. The MACD indicator is growing, maintaining an uncertain buy signal. Stochastic is approaching its maximum values.
It is recommended to open long positions only after a confident breakout of the 1.3762 level with a target of 1.3845. We set the stop loss at 1.3720.
If the price bounces off the 1.3762 level and breaks down to 1.3733, we get a signal to form sales with a target of 1.3675. In this case, we will set the stop loss at 1.3762.