Market Spotlight: USDCAD Breaking Out Ahead of Core PCE

Yellen Says US Can Avoid Hard LandingUS stocks were seen climbing off the lows yesterday as comments from Treasury Secretary Janet Yellen helped boost sentiment. The former Fed chair was speaking on the side-lines of the G20 summit and told reporters that she believes the US has the potential to avoid a hard landing. Citing the strength of the US labour market and a stronger balance sheet than pre-GFC, Yellen said that the economy is in good shape and noted the declines in inflation as a further encouraging sign.Core PCE Up NextYellen’s comments come just ahead of today’s US core PCE data. The market will be closely watching the release, given that it Is used by the Fed as a primary gauge of inflation, more so than CPI. On the back of the uptick in January inflation, expectations are for a similar lift with analysts projecting a 0.4% from 0.3% monthly increase. Any result at this level or above should keep the current narrative of hawkish Fed expectations intact, driving USD higher.Where To Trade?With Canadian CPI seen undershooting forecasts last month, in stark contrast to the US, the BOC’s current “on hold” guidance looks solid. With divergence opening up once again between the Fed and the BOC, USDCAD looks vulnerable to further upside if today’s data comes in hot.Technical ViewsUSDCADThe rally in USDCAD off the recent lows has seen price breaking out above the bear trend line from last year’s highs and above the 1.3501 level. While above here the focus is on a further push higher towards the 1.3683 level, in line with bullish momentum studies readings. Above 13683, 1.3839 is the bigger target to play for.