Two trades to watch: USD/CAD, Gold

USD/CAD falls ahead of speeches from Fed Chair Powell & BoC’s Macklem

USD/CAD is falling after four consecutive days of gains as investors look ahead anxiously to speeches by Federal Reserve chair Jerome Powell and BoC’s Tiff Macklem.

Investors will be keen to see whether Jerome Powell adopts a more hawkish stance in light of Friday's non-farm payroll data, which showed that job creation soared in December, smashing forecasts, and unemployment dropped to its lowest level in 54 years. A more hawkish-sounding Powell could lift the US dollar.

Meanwhile, Tiff Macklem speaks after the BoC pressed pause on rate hikes in the last central bank meeting after hiking rates to 4.5%, the highest level in 15 years. The central bank believes that the disinflationary process has already started. As a result, Tiff Macklem could sound less hawkish on interest rate guidance, potentially acting as a drag on the loonie.

Separately oil prices have extended their recovery above 75 on optimism that the economic recovery in China will left demand quickly in 2023. Oil, Canada’s main export, trades 1.4% higher at the time of writing, supporting the CAD.

Where next for USD/CAD?

After finding support on the 100 sma, the USD/CAD price rebounded higher, breaking out of the falling wedge, keeping buyers hopeful of further upside.

Buyers will look for a rise above 1.35 the 50 sma and the January 19 high, which could prove a tough nut to crack. A  rise above here opens the door to 1.37, the December high.

Sellers could look for a break below 1.3350, back into the wedge. Strong support can be seen at 1.32 the confluence of the 100 sma and the falling trendline support. A move below here creates a lower low.

Will Gold fall after Powell’s speech?

Gold is rising for a second straight day after dropping 3.2% in the previous week. The precious metal is finding some support from a softer U.S. dollar, which is pulling back from a 4-week high ahead of a speech by Federal Reserve chair Jerome Powell.

After the impressive NFP report, all eyes are on Federal Reserve Chair Jerome Powell, who is due to participate in a discussion at the Economic Club of Washington at 17:00 GMT.

His stance on the rate outlook and future path for monetary policy could have a significant impact on the USD and USD-denominated, non-yielding gold.

Powell’s speech comes after comments from Treasury Secretary Janet Yellen who yesterday said that she considers the US economy to be on a path where inflation is declining significantly, and recession will be avoided.

Where next for Gold prices?

After running into resistance at 1950 last week, the Gold price broke below the multi-month rising trendline and the 20 sma, finding support at 1860.

From here, the price has recovered to retest 1875 the 20 sma resistance. The RSI is almost neutral, giving away few clues. A meaningful rise above the 20 sma could see buyers push higher toward the psychological level 1900 and the January 31 low.

Should sellers successfully defend the 20 sma, a break below 1860, the 4-week low could create a lower low and expose the 50 sma at 1850. A break below here could see a further decline to 1825, the January low.