USDCAD Technical Analysis – Pullback or reversal?

USD

• The Fed left interest rates unchanged as expected at the last meeting with basically no
  change to the statement. The Dot Plot still showed three rate cuts for 2024 and
  the economic projections were upgraded with growth and inflation higher and the
  unemployment rate lower.
• The US Q1 GDP
  surprisingly missed expectations although the core components showed a strong
  economy, nonetheless.
• The US PCE came in line with expectations.
• The US NFP beat expectations across the board
  although the average hourly earnings came in line with forecasts.
• The US PMIs missed expectations in April with the
  commentary citing lower inflationary pressures but also increased layoffs.
• The market expects the first rate cut in
  September.

CAD

• The BoC left interest rates unchanged at
  5.00% as expected changing a line in the statement that indicated less concern
  about inflation and thus the possibility of a cut in June if the trend remains
  intact.
• The latest Canadian CPI came in line with expectations although
  the underlying inflation measures eased further.
• On the labour market side, the latest report missed
  expectations across the board although we saw an uptick in wage growth which is
  something that the BoC is watching closely.
• The Canadian Manufacturing PMI
  improved slightly in March while the Services PMI weakened further. Both the
  measures remain in contractionary territory.
• The market expects the first rate
  cut in June.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD bounced
near the key support zone
around the 1.3620 level where had also the 61.8% Fibonacci retracement level
for confluence. If we
get another push to the downside, we can expect the buyers to step in at the
support with a defined risk below it to position for a rally into the 1.39
handle. Alternatively, if the price were to continue lower, we can expect the
buyers to lean on the major trendline. The
sellers, on the other hand, will look to pile in at every break lower to keep
targeting the 1.3225 level.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price is
at a key resistance zone around the 1.37 handle where we can find the
confluence of the downward trendline and the 61.8% Fibonacci retracement level.
This is where we can expect the sellers to step in with a defined risk above
the Fibonacci level to position for a break below the 1.3620 support with a
better risk to reward setup. The buyers, on the other hand, will want to see
the price breaking higher to pile in and position for a rally into the 1.39
handle.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price recently diverged with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we got a pullback into the downward trendline and the
Fibonacci resistance, but if the price continues higher, the next target would
stand around the 1.3731 high where a further breakout would open the door for a
rally into the 1.39 handle.

Upcoming Events

Today, we have the US Q1 Employment Cost Index and
the Consumer Confidence report. Tomorrow, we get the US ADP, the ISM
Manufacturing PMI, the Job Openings and the FOMC rate decision. On Thursday, we
will see the latest US Jobless Claims figures. On Friday, we conclude the week
with the US NFP and ISM Services PMI.