Today, investors' attention will focus on US data. A job market report from ADP company on a change in employment in the private sector will be published in the early afternoon, where it is expected that 199k jobs will be created in February. In addition, data on unit labor costs and labor productivity will be reported in the fourth quarter of 2017. The market participants will also find out how the US trade balance looked like in January. In the evening, the Fed Beige Book, which is a report on the state of the American economy will be revealed. The final reading of orders for durable goods in the US, released yesterday, indicates a slowdown in investment at the beginning of the year. However, this should not be a barrier to the next interest rate hike in March, which would also be indicated by yesterday's Lael Brainard speech from the Fed, in which she opted for further normalization of monetary policy in the US.
However, during the Wednesday session, the main event will be the interest rate decision by the Bank of Canada. The market consensus does not assume changes in monetary policy parameters, so the main interest rate in Canada should be maintained at 1.25%. Please notice, that in January this year BoC decided on a third rate hike in the current cycle of monetary policy normalization and the incoming macroeconomic data from Canada, in particular, those from the labor market, will remain important for further decisions of the bank. Any hike by BoC would be a big surprise for the global investors.
Let's now take a look at the USD/CAD technical picture at the H4 time frame. The market has managed to retrace 61% of the previous swing down and now is hovering around the technical support at the level of 1.2919 as it awaits the BoC interest rate decision. Please notice, that momentum still looks strong, but the market conditions have clearly entered an overbought level, so a corrective pull-back will not be anything unexpected here.
