USDCAD Technical Analysis – Time for a pullback?

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 Core PCE
  came
  in line with expectations with disinflation continuing steady.
• The labour market
  displayed signs of softening although it remains fairly solid as seen also last
  week with a strong beat in Jobless Claims.
• The ISM Manufacturing PMI beat
  expectations yesterday in another sign that the US economy remains resilient.
• 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 doesn’t expect the BoC to
  hike at the upcoming meeting.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the USDCAD pair
spiked lower towards the 1.34 support zone and
shot higher on Friday for no clear reason other than weakness in the oil market
and a flat GDP report. Such huge rallies get overstretched pretty fast as
depicted by the price 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 there’s no
clear level where to lean on, but the buyers might want to wait for the price
to pull back into the 38.2% Fibonacci retracement level
where they will also find the confluence with the
red 21 moving average and the 1.36 handle. The sellers, on the other hand,
might start to pile in around current highs to position for another drop into
the 1.35 support.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a minor divergence with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see a pullback into the previous resistance now
turned support around the 1.3668 level where the buyers
are likely to step in with a defined risk below the support to target new
higher highs. The sellers, on the other hand, will want to see the price
breaking the support to pile in and position for a drop into the 1.36 handle
ultimately targeting the 1.35 support.

Upcoming Events

This week we have many key economic releases that will
culminate in the US NFP report on Friday. Today, we will have the US Job
Openings data which led to a strong selloff the last time as the big miss made
Treasury yields to fall due to less labour market tightness and less hawkish
Fed expectations. Tomorrow, it will be the time for the ADP report and the ISM
Services PMI. On Thursday, we will see the Jobless Claims data, which continues
to show a solid labour market. Finally on Friday, it will be the time for the
NFP report which is the only one the Fed will see before its next rate decision
and the Canadian Jobs data.