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
  yesterday 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 this 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 we got a
meaningful correction in USDCAD following strong economic data from Canada with
the wage growth increasing and the inflation data surprising to the upside. The
pair bounced on the key 1.34 support where we
had also the confluence with the
50% Fibonacci retracement level.
The price recently made a new lower low and the moving averages have
crossed to the downside which should be a signal that the trend has changed
from bullish to bearish.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price has
pulled back into the previous support now turned resistance at 1.35
where we can also find the 38.2% Fibonacci retracement level for confluence.
This is where the sellers are likely to pile in with a defined risk above the
high to target a break below the 1.34 handle. The buyers, on the other hand,
will want to see the price breaking above the 1.35 resistance to start
targeting the 1.3668 level again. On this timeframe, the trend is bullish as
the price broke above the trendline, made a
new higher high and the moving averages have crossed to the upside.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a good support zone around the 1.3460 level, which might also be the
neckline of the possible double bottom on the
1.34 handle. We can also see that we have the confluence with the 50% Fibonacci
retracement level and the 4-hour 21 moving average. This is where the buyers
should pile in with a defined risk below the support to target the 1.3668
resistance. The sellers, on the other hand, will want to see the price breaking
below the support to invalidate the bearish setup and position for a break
below the 1.34 handle.

Upcoming Events

Today we have the
Canadian Retail Sales and the Flash PMIs for the US.