USDCAD, gold, EURUSD

BoC interest rate decision --> USDCAD

The Bank of Canada will announce its monetary policy on Wednesday. This bank lowered interest rates by 25 basis points at its recent meeting, citing falling inflation and slow economic growth. In the previous week, the Canadian CPI showed that inflation fell further in June, supporting a second rate cut with a probability around 85%. A rate cut alone is unlikely to shake the Canadian currency. Traders may closely watch for any signs that the easing cycle will continue in September.

The loonie is expected to fall in the case of more dovish signals. Currently, USDCAD is continuing the rebound off the 200-day simple moving average (SMA) near the 1.3600 round number, but it remains within a trading range of 1.3600-1.3790. Immediate resistance could come from the 1.3755 and 1.3790 levels, while any closing days above the aforementioned level may drive the pair to 1.3845. On the other hand, a slip to the downside may help the market retest the 20- and 50-day SMAs around 1.3670.

US Core PCE index --> Gold

After softer-than-expected CPI statistics, Fed officials, including Chair Powell, said the figures bolster their confidence that price pressures will remain moderate. Following the June employment report, which showed further labor market softness, market participants fully priced in a September rate cut and assigned a decent 50% chance for a third reduction this year, with such a move fully factored in for January. Next Thursday, the first US GDP estimate, and the release of the core PCE index and personal income and spending statistics on Friday, will test these bets. The June core CPI deceleration predicts a similar reaction in the core PCE index, which may prevent traders from raising their assumed path even if GDP surprises to the upside.

Following the pullback from the record high of 2,483.61, gold prices fell almost 4%, reaching the inside swing high of 2,392. More declines could open the way for a steeper bearish correction, hitting the 20- and 50-day SMAs at 2,377 and 2,359, respectively. The 2,350 level, which is slightly lower, may halt downside moves ahead of the rising trend line at 2,305. A potential rebound off the 2,392 support may open the way for a retest of the latest peak at 2,483.61 and the 261.8% Fibonacci extension level of the down leg from 2,079 to 1,810 at 2,514.  

Eurozone flash PMIs --> EURUSD

The ECB left interest rates unchanged at Thursday's meeting. President Lagarde said at the press conference that a rate cut in September is "wide open." Investors maintained a high possibility of such a move occurring at almost 65%, suggesting that another quarter-point cut by year's end is still very much on the cards. In that scenario, we could prolong the recent euro/dollar drop and increase the likelihood of a rate decrease in September. The Eurozone's flash PMIs are coming out on Wednesday, and June’s figures revealed some softness.

EURUSD is heading down after climbing to the 1.0950 resistance level and piercing the long-term descending trend line. The SMAs are suggesting more gains as they all posted a bullish crossover. So, any pressures to the upside could find immediate resistance at the 1.0950 barrier again, ahead of the restrictive region of 1.0980–1.1000. However, any movements below the 1.0850 support could pave the way for a test of the SMAs at 1.0815 and the 1.0800 round number.