USDCAD Technical Analysis - Playing the range

USD

The Fed left interest rates unchanged as expected at the last meeting with a shift in
the statement that indicated the end of the tightening cycle.
The US GDP beat
expectations by a big margin.
The latest US CPI slightly beat expectations but analysts
expect the Core PCE to print at 0.2% M/M again following the CPI data.
The labour market continues to soften but remains
resilient with US Jobless Claims missing expectations this week but hovering around
cycle lows.
The latest US PMIs beat expectations by a big margin for
both the Manufacturing and Services measures.
The US Retail Sales beat expectations across the board.
The University of Michigan Consumer Sentiment report jumped to the highest levels since
2021.
The Fed members recently have been pushing
back on the aggressive rate cuts expectations.
The market sees 50/50 chance of a rate cut in
March.

CAD

The BoC left interest rates unchanged at
5.00% as expected and dropped the language about being prepared to hike if
needed.
The latest Canadian CPI beat expectations across the board with
the underlying inflation measures remaining elevated, which should give the BoC
a reason to wait for more data before considering rate cuts.
On the labour market side, the latest report missed
expectations although wage growth spiked to the highest level since 2021.
The Canadian PMIs continue to fall
further into contraction as the economy keeps on weakening amid restrictive
monetary policy.
The market expects the BoC to start
cutting rates in Q2.

USDCAD Technical Analysis –
Daily Timeframe

USDCAD Daily

On the
daily chart, we can see that USDCAD broke through the key trendline and
extended the rally into the 1.35 handle. This breakout opened the door for a
move into the swing high resistance around
the 1.36 handle where we can also find the 61.8% Fibonacci retracement level
for confluence. The
buyers should keep on looking for dip-buying opportunities on the lower
timeframes while the sellers will want to see the momentum changing and some
key breakouts before piling in more aggressively.

USDCAD Technical Analysis –
4 hour Timeframe

USDCAD 4 hour

On the 4 hour chart, we can see that the pair has
been consolidating recently between the 1.3430 support and 1.3530 resistance.
In such instances, one can “play the range” by buying at support and selling at
resistance. In fact, the buyers would have a much better risk to reward setup
if they bought at support targeting the 1.36 handle, while the sellers would
have it by selling at resistance targeting a breakout below the support.

USDCAD Technical Analysis –
1 hour Timeframe

USDCAD 1 hour

On the 1 hour chart, we can see that the
sellers stepped in around the 38.2% Fibonacci retracement where we had also the
red 21 moving average for
confluence to target a drop into the support and eventually a breakout. The
buyers, on the other hand, will likely pile in around the support to position
for a rally back into the resistance and increase the bullish bets if the price
were to break above the downward trendline.