USDCAD Technical Analysis – We remain stuck in the range

Fundamental
Overview

The USD has been unusually
resilient this week despite lots of negative catalysts. The US PPI and Core CPI came in on the softer side which saw the
market increasing the easing expectations from 24 bps before the data to 37 bps
after.

Moreover, yesterday Fed’s Waller delivered some surprisingly dovish
comments saying that a rate cut could come in the first half of this year if
the inflation data continues to show improvement and that a March cut cannot be
completely ruled out.

The market pricing
increased to 42 bps by year end as a result which is now much closer to the 50
bps projected by the Fed.

On the CAD side, the BoC cut
interest rates by 50 bps at the last policy meeting but dropped the
line saying “if the
economy evolves broadly in line with our latest forecast, we expect to reduce
the policy rate further”, which suggests that we reached the peak in
“dovishness” and the central bank will now switch to 25 bps cuts and
will slow the pace of easing.

The Canadian Employment report last Friday beat
expectations across the board by a big margin. That and the NFP report made the
market to scale back rate cuts expectations from 67 bps of easing by year end
to 41 bps but thanks to the softer US inflation data this week and the pullback
in global bond yields, the pricing is now back to 58 bps of easing by year end.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD eventually bounced from the major trendline as the buyers stepped in to
position for a rally into new highs. The sellers will need a break below the
trendline to gain more conviction and start targeting new lows.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that overall the pair continues to range between the 1.4340 support and the 1.4460 resistance. The market
participants will keep on playing the range until we get a breakout on either
side.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor upward trendline defining the current bullish momentum
on this timeframe. The buyers will likely lean on the trendline to position for
a break above the resistance and new highs. The sellers, on the other hand,
will look for a break below the trendline to target a drop into the major
trendline and a break below it. The red lines define the average daily range for today.

Upcoming
Catalysts

Today, we have the US Housing Starts and Building Permits, and the US
Industrial Production and Capacity Utilization.

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