The economic data calendar will take a chill pill this week, but that just means traders will have more time to digest last week’s top-tier and this week’s mid-tier events.
Will we see the start of longer-term trends now that a bunch of major central banks have shared their biases?
Before all that, ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Check it!
And now for the closely-watched potential market movers this week:
Major Economic Events:
RBA’s policy decision (Feb 7, 3:30 am GMT) – Just when markets thought the Reserve Bank of Australia (RBA) is almost done raising its rates, Australia’s Q4 2022 inflation printed its highest reading since 1990.
Traders now see the central bank raising its rates by another 25 bps to 3.35%, with Gov. Lowe taking leaf from the Fed’s playbook and saying that RBA will be “data-dependent” moving forward.
RBA is also printing its new inflation estimates so keep your eyes peeled for clues on the central bank’s future biases!
UK’s preliminary Q4 GDP (Feb 10, 7:00 am GMT) – A boost from the Queen’s funeral last September is expected to have offset some of the slowdown in economic growth in Q4.
Investors see the economy stagnating in Q4 after a 0.3% dip in Q3. A recession in the first half of 2023 is still in play, though, so take a closer look at the report’s details to see which economic drivers can make or break a “hard” recession this year!
Canada’s jobs reports (Feb 10, 1:30 pm GMT) – In its last decision the Bank of Canada (BOC) signaled a “conditional pause” after raising its interest rates eight consecutive times. It also expects that the full effects of its rate hikes on the labor market will play out over a longer period.
Has BOC’s rate hikes affected Canada’s labor market already? Jobs numbers surprised to the upside in December, with the economy creating a net 104K jobs (vs. +8K expected) and the unemployment rate dipping from 5.1% to 5.0%.
This week we’ll see if the economy has created 15K more jobs in January as markets are expecting. The devil may be in the details this time because the unemployment rate is also expected to rise to 5.2% while annualized hourly wages may drop from 5.2% to 4.4%.
Forex Setup of the Week: USD/CAD
USD/CAD Daily Forex Chart by TradingView
USD/CAD just bounced from its 1.3250 support after a much better than expected U.S. NFP report boosted the odds of the Fed raising its interest rates further.
But USD/CAD is poppin’ up lower highs and forming a descending triangle pattern on the daily time frame. What’s more, it’s also been trading below the 100 SMA since the start of the year.
Are USD bulls about done buying USD/CAD?
Speeches by a few key Fed members and Canada’s jobs report on Friday may dictate USD/CAD’s next direction.
If Fed members don’t warn against expecting a rate cut this year, then USD could drop and risky bets like commodity-related CAD may gain support.
USD/CAD could break below its 1.3250 and 200 SMA support and maybe head for areas of interest like 1.3050 or 1.3000.
But if traders extend Friday’s USD-friendly theme, or if this week’s Canadian jobs release support a “conditional pause” scenario for the BOC, then USD/CAD could retest its trend line resistance if not return to its December highs.
