USDCAD Technical Analysis – The Canadian CPI sealed the rate cut

Fundamental
Overview

The USD remains on the
backfoot as the US data continues to point to resilient growth with falling
inflation. Yesterday, we got a good US Retail Sales report suggesting that the stories
of deteriorating consumer spending might have been exaggerated. Overall, this
should support the soft-landing narrative and be positive for the risk
sentiment.

The CAD, on the other hand,
remains supported against the US Dollar mainly because of the risk-on
sentiment. This morning we’ve been seeing even more weakness for the greenback
which might be due to the selloff in the USDJPY pair as flows there could have
spilled over into other markets. On the monetary policy front, yesterday’s Canadian
CPI sealed the rate cut at the upcoming meeting as the data missed
expectations across the board.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD bounced from the key 1.36 support zone and extended the rally into the 1.37
handle before pulling back. If the price falls back into the support zone, we
can expect the buyers to step in once again to position for a rally back into
the 1.3785 resistance. The sellers, on the other hand, will want to see the
price breaking below the support zone to increase the bearish bets into the new
lows with the 1.35 handle as the first target.

USDCAD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price this week broke out of the tight range between 1.3600 and
1.3650 levels and extended the rally into the 1.37 handle. We are now seeing a
pullback into the resistance
turned support at 1.3650 where we can expect the buyers to step in to
position for the continuation of the rally. The sellers, on the other hand,
will want to see the price falling back below the 1.3650 level to increase the
bearish bets into the 1.36 support targeting a breakout.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price today fell below the upward trendline
that was defining the recent bullish momentum. This might be a reversal signal
or just a more complex pullback. A break above the downward trendline should
give the buyers more confidence for new highs, while the sellers will likely
lean on it to position for a break below the 1.3650 level. The red lines define
the average daily range for today.

Upcoming
Catalysts

Today we have Fed’s Waller speaking. Tomorrow, we have the latest US Jobless
Claims figures, while on Friday we conclude with the Canadian Retail Sales
data.

This article was written by Giuseppe Dellamotta at www.forexlive.com.