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Eyes on Bank of Canada decision today

Each day, new evidence of economic slowdown surfaces in the US, increasing market expectations of an earlier rate cut by the Federal Reserve later this year.

The most recent data comes from the JOLTS Job Openings report, which showed a drop to 8059K in April compared to 8355K in March. This was lower than the expected slight decline to around 8350K. It marks the lowest level since February 2021.

As a result, the Fed Fund Futures are pricing in a faster pace of rate cuts this year. The probability of rate cuts for September is at 76%, while it has increased to 100% for November’s meeting and 170% for December.

The US stock market closed higher yesterday, with the Dow Jones gaining the most at 0.36%, followed by Nasdaq 100 at 0.3% and S&P 500 at 0.15%. It’s expected that volatility will decrease as investors await another round of economic reports later this week, including the ADP Non-farm Employment Change, Services PMI, and the US Jobs Report.

US 10-year yield below 4.4%

The US 10-year yield continued to decline following yesterday’s data, breaking multiple support areas and reaching as low as 4.32, marking another support level to keep an eye on. This is also the lowest level since the beginning of April. The time/price method still suggests that the next key date is the 10th of June, which should give us more clues on whether there will be a continuation or a new trend.

USD near 104.0 support

The US Dollar Index has experienced a sharp decline since the beginning of the week, breaking through multiple support areas mentioned in our previous reports, including the solid 104.0 support.

In the meantime, technical indicators remain bearish on most timeframes. However, a break below 104.0 is still necessary to pave the way for further declines, possibly towards the 103.74 support area.

Eyes on the Bank of Canada decision

The Bank of Canada is expected to cut interest rates after six months of on-hold meetings. The Bank is anticipated to cut its policy rate by 25 bps. Inflation in Canada has accelerated its downtrend since December of last year.

The potential rate cut today may be driven by the continuous decline in consumer prices and the notable slowdown in the labor market.

USDCAD hovering below resistance

USDCAD has been trading within a range since the beginning of May, hovering below the 1.37 and 1.3750 resistance area, while technical indicators are almost flat.

Today’s decision might not be about whether the Bank of Canada will cut interest rates, but more about the timing of future rate cuts. If the Bank decides to introduce a hawkish cut, it could cause the USDCAD to decline to around 1.36, with a possibility of breaking that support and reaching 1.3450 in the coming weeks.

On the upside, a break above 1.3750 would open the way for further gains, potentially towards 1.38.


Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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