USD/CAD churns on Wednesday ahead of Fed meeting Minutes

• USD/CAD tested a new high for the week but remains tepid.
• Canada’s New Housing Price Index declined slightly in January.
• Fed’s FOMC meeting Minutes to be the key release for Wednesday.

USD/CAD briefly tested a fresh high for the week, but the pair continues to churn in near-term consolidation levels as markets buckle down for the latest meeting Minutes from the Federal Reserve’s (Fed) Federal Open Market Committee (FOMC). Market momentum remains thin with US Purchasing Managers Index (PMI) figures due on Thursday, and the trading week will wrap up with the Fed’s latest Monetary Policy Report on Friday.

Canada saw its New Housing Price Index decline in January with the annualized figure softening at a slower rate than previous. Canadian Retail Sales are due on Thursday but are likely to be engulfed by the US PMI prints.

Daily digest market movers: USD/CAD cycles ahead of FOMC with key data around the corner

• Canada’s New Housing Price Index declined 0.1% in January MoM versus the previous flat print of 0.0%.
• The YoY figure fell 0.7%, less than the previous print of -0.9%.
• The FOMC’s latest meeting Minutes will draw plenty of scrutiny as money markets size up a June rate cut from the Fed.
• Fed Minutes Preview: Investors to scrutinize discussions as markets lean toward June for rate cuts
• Meanwhile, Richmond Fed President Thomas Barkin hit newswires, noting that while the US is on the “back end” of its inflation problem, there’s still further to go.
• Barkin also noted that much of the current declines in inflation have been centered around goods, with services prices remaining problematic for the Fed’s inflation targets.
• Fed's Barkin: Still ways to go to get to a soft landing
• Canada’s Retail Sales due on Thursday are expected to rebound with December’s MoM Retail Sales forecast to print at 0.8% versus the previous print of -0.2%.
• The US’ S&P Global Manufacturing PMI for February, also slated for Thursday, is expected to tick down to 50.5 from 50.7.

Technical analysis: USD/CAD adrift just north of 1.3500

USD/CAD found a little extra room on the high side early Wednesday, touching a new high for the trading week, but the pair remains firmly embedded in near-term technical congestion. The USD/CAD is sticking close to the 1.3500 handle as markets await a firm push in either direction.

The pair finally finished closing last week’s Fair Value Gap (FVG) at 1.3530. The USD/CAD sees a heavy support zone between 1.3480 and 1.3470, just above last week’s Order Block (OB) near 1.3460. Technicals favor a continued bullish break of character, but only if the pair is able to build enough momentum to return to last week’s peak bids near 1.3585.

Daily candles see the USD/CAD continuing to struggle near the 200-day Simple Moving Average (SMA) at 1.3478, but a pattern of higher lows supports a thin push into the bullish side. The USD/CAD is up 2.5% from the last swing low into the 1.3200 handle but still has a ways to go on the high side, still down nearly 3% from last November’s peak near 1.3900.

USD/CAD hourly chart

USD/CAD daily chart