Week Ahead in FX (Apr. 10 – 14): BOC Decision, U.S. CPI and Retail Sales, FOMC Minutes Due

It’s another shortened trading week but still a busy one!

We’ve got the BOC statement, FOMC minutes, and top-tier U.S. data, namely CPI and retail sales figures, lined up.

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 on the economic calendar this week:

Major Economic Events:

U.S. headline and core CPI figures (Apr. 12, 12:30 pm GMT) – First up, we’ve got Uncle Sam’s official CPI reports on deck, likely providing more guidance on what the Fed might do next.

Headline inflation is expected to slow down from a 0.4% month-over-month increase in February to just a 0.2% uptick in March, effectively bringing the yearly rate lower from 6.0% to 5.2%. Meanwhile, the core version of the report is projected to dip from 0.5% to 0.4%.

BOC monetary policy statement (Apr. 12, 2:00 pm GMT) – Canada’s central bank is scheduled to announce their policy decision midweek and is widely expected to keep rates on hold at 4.50%.

Now this scenario has long been priced in by the markets, as policymakers already sat on their hands in the previous meeting and signaled a longer pause in tightening for the time being.

With that, their economic outlook for the next few months might generate a stronger reaction from Loonie pairs, so watch out for the presser at 3:00 pm GMT as well.

FOMC meeting minutes (Apr. 12, 6:00 pm GMT) – In their March policy statement, the Fed decided to hike interest rates by another 0.25% from 4.75% to 5.00% to account for banking sector concerns while still attempting to keep price pressures in check.

The transcript of their latest meeting should provide more insights on how concerned committee members are when it comes to the recent liquidity shakeup, as well as the slowdown in employment and inflation.

Keep in mind, however, that the latest batch of mostly downbeat jobs indicators and PMI readings came after the March meeting, so any hawkish remarks might be taken with a grain of salt.

Australia’s employment report (Apr. 13, 1:30 am GMT) – After printing a surprisingly strong headline jobs figure in February, the Land Down Under might report a bit of a downturn in hiring for March.

Analysts are expecting to see an increase of 21.2K in employment for the month, lower than the earlier 64.6K increase. The unemployment rate is slated to tick higher from 3.5% to 3.6% as well.

U.S. retail sales (Apr. 14, 12:30 pm GMT) – Another dip in consumer spending is eyed for March, as the headline retail sales figure might show a 0.5% monthly decline while the core reading could post a 0.4% dip.

This would represent a slightly sharper reduction in spending, following the 0.4% decline in headline retail sales and 0.1% dip in the core figure for February. Weaker than expected results could further undermine Fed tightening hopes.

Forex Setup of the Week: USD/CAD

USD/CAD 1-hour Forex Chart by TradingView

Since it’s gonna be a busy week for both the U.S. dollar and the Loonie, I’m hoping to get a bit more volatility on USD/CAD.

Will the selloff carry on?

The pair is currently in correction mode from its latest slide, with price pulling up close to the 38.2% Fibonacci retracement level as seen on the hourly time frame.

Technical indicators are pointing to a continuation of the slide, as the 100 SMA is below the 200 SMA while Stochastic is moving south.

I’m still gonna keep a lookout for a larger correction right around the BOC decision, though, as a very dovish statement or a surprise interest rate cut might lead to a sharp rally for this pair.

In that case, USD/CAD could test the higher retracement levels, potentially the 61.8% Fib that happens to line up with a former support zone at 1.3660.

Of course the major economic catalysts from the U.S. would likely bring in some action, too, as downbeat CPI and retail sales results could seal the deal for a Fed hiking pause pretty soon.

If so, we might just see USD/CAD slide back to its swing low near the 1.3400 handle later on!