We keep hearing from the
Fed members that two or more rate hikes this year are likely if the data
remains solid. In fact, since the last FOMC meeting, the data indeed kept on
surprising to the upside and led to a more hawkish repricing in interest rates expectations
that eventually favoured the greenback. On a different note, the BoC surprised
with a rate hike at the last meeting citing stubbornly high inflation with the
market expecting another hike from the BoC, but the recent miss in the Canadian
CPI report made the market a bit less certain on that.
USDCAD Technical Analysis –
Daily Timeframe
USDCAD Daily
On the daily chart, we can see that USDCAD has
eventually rallied back above the key 1.3225 level. Was this a fakeout? We will
see in the next weeks. The sellers now have the red 21 moving average and the
1.33 handle as resistance to
position for more downside with a defined risk above the level. The buyers will
need to break above the 1.33 handle to get more conviction for further upside
and extend the rally to the 1.34 level.
USDCAD Technical Analysis –
4 hour Timeframe
USDCAD 4 hour
On the 4 hour chart, we can see that the price has
been diverging with the
MACD for the
whole downside move since 1.34. This is generally a sign of a weakening
momentum often followed by pullbacks or reversals. In this case, given that the
price has also broke above the trendline and the
moving averages have crossed to the upside, we may get a bigger pullback into
the 1.34 handle where we can also find the 61.8% Fibonacci retracement level.
USDCAD Technical Analysis –
1 hour Timeframe
USDCAD 1 hour
On the 1 hour chart, we can see that the
price is consolidating just above the 1.3225 level. This will be a key support
zone for the buyers now where they can pile in with a defined risk below the
38.2% Fibonacci retracement level and target the 1.34 handle. The sellers, on the
other hand, will need the price to break with conviction below the support zone
to jump onboard and extend the eventual selloff towards a new low. Today, we
have the US PCE report, and a miss should lead to some USD weakness, while a
beat should strengthen it.