USDCAD Technical Analysis – Key levels in play

US:

• The Fed left interest rates unchanged as
  expected.
• The macroeconomic projections were revised higher
  as the economy showed much stronger resilience than expected and the Dot Plot
  showed that the majority of members still expects another rate hike by the end
  of the year with less rate cuts in 2024.
• Fed Chair Powell
  reaffirmed their data dependency but added that they will proceed carefully as
  they are trying to find the optimal level of rates. Powell also added that the
  soft landing is not the base case at the moment, although they are aiming for
  it.
• The latest US CPI came
  in line with expectations, so the market’s pricing remained roughly the same.
• The labour market
  displayed signs of softening although it remains fairly solid as seen also last
  week with the strong beat in Jobless Claims.
• The market doesn’t expect the Fed to hike again at
  the moment.

Canada:

• The BoC left interest rates at 5.00% as expected but remains prepared to
  raise rates further if needed.
• BoC Governor Macklem delivered a hawkish speech which points to another rate hike
  if the data remains strong into the next policy meeting.
• The Canadian underlying inflation
  data has been beating expectations month after month and last week we got another beat across the board.
• On the labour market side, the recent
  report showed another uptick in wage growth and this is something that Governor
  Macklem said the BoC is watching carefully.
• The market now sees basically a
  50/50 chance that the BoC hikes at the next meeting.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the big
correction following first the strong Canadian wage growth data and then the
higher-than-expected inflation figures took the USDCAD pair back to the 1.34
handle. The pair bounced on the key support and it’s
now consolidating around the previous support now turned resistance around
the 1.35 handle. At the moment, the pair looks to have switched to a downtrend
given that the price made a new lower low and the moving averages crossed
to the downside. The major pairs generally move in sync, so this might be just
a more complex pullback before another rally.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
strong resistance around the 1.35 handle where we have also the 38.2% Fibonacci retracement level of
the entire correction for confluence. On this
timeframe, the price made a new higher high recently and the momentum seems to
be leaning towards the upside. The consolidation has also formed an ascending triangle and we
can generally see strong and sustained moves after the breakout of such
patterns.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
USDCAD tried to break above the resistance recently but got smacked back down
into the upward trendline. We
can notice though that the pair made another higher low recently, so the buyers
are indeed charging towards the resistance. This is now a game of patience as a
break to the upside should lead to more buyers piling in and position for a
rally into the 1.3668 resistance, while a break to the downside should see the
sellers taking the pair into the 1.34 support again and then targeting a break
lower.

Upcoming Events

Today we will see the latest US Consumer Confidence
report which surprised to the downside the last time and weighed on the USD in
the short term as Treasury yields fell. On Thursday, we will have another US
Jobless Claims data which keeps on showing strength in the labour market
maintaining the hawkish pricing in interest rates expectations. Finally, on
Friday, we will get the latest US PCE data.