USDCAD Technical Analysis – We are at a key level

USD

• The Fed left interest rates unchanged as expected with a shift in the statement that
  indicated the end of the tightening cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t push back against the strong dovish pricing
  and even said that they are focused on not making the mistake of holding rates
  high for too long, which implies a rate cut coming soon.
• The US CPI this week came in line with expectations
  with the disinflationary progress continuing steady. This was also confirmed by
  the US PPI the day after where the data missed
  estimates.
• The labour market has been showing signs of
  weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming
  in strongly.
• The latest ISM Manufacturing PMI missed expectations falling further into
  contraction, while the ISM Services PMI beat forecasts holding on in expansion.
• The market expects the Fed to start cutting rates
  in Q1 2024.

CAD

• The BoC kept the interest rate steady at
  5.00% as expected with the usual caveat that
  it’s prepared to raise the policy rate further if needed.
• BoC Governor Macklem recently has been leaning on a more
  neutral side as inflation continues to abate.
• The recent Canadian CPI missed expectations across the
  board and the underlying inflation measures eased, which was a welcome
  development for the BoC.
• On the labour market side, the latest report beat expectations
  although the unemployment rate ticked higher again.
• The market expects the BoC to start
  cutting rates in Q2 2024.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD rejected
the trendline and sold
off as the Fed came out surprisingly dovish. The pair has now reached the key
swing low at 1.3382 where we can expect the buyers to step in with a defined
risk below the level to position for a rally into the trendline. We can also
notice that the price is a bit overstretched to the downside as depicted by the
distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we recently
got a fakeout above the trendline, which is generally a reversal signal, and as
soon as the price fell below the support at
1.3550, the sellers piled in aggressively supported by the dovish Fed. From a
risk management perspective, the sellers would be better off waiting for a
pullback after such a strong and quick selloff. The probable resistances will
be the 1.35 handle and the trendline.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is starting to diverge with
the MACD right
at the key swing low level. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. This should be another layer of
confluence for the buyers with the first target coming in at 1.35.

Upcoming Events

Today the only notable event on the agenda is the
release of the US PMIs.