USDCAD Technical Analysis – Dovish Powell weighs on the US Dollar

Fundamental
Overview

Last Friday, Fed Chair
Powell delivered a more dovish than expected speech at the Jackson Hole Symposium as he
basically kept the door open for a 50 bps cut at the September meeting. In
fact, the line saying that they will do everything they can to support a strong
labour market was key.

That pushed Treasury yields
lower and weighed on the US Dollar across the board. In fact, the recent
appreciation of the CAD has been mostly driven by the US Dollar side of the
equation. The Bank of Canada started its easing cycle before the Fed and the
market expects the central bank to continue to deliver rate cuts at each of the
remaining meeting for this year.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD eventually managed to break below the key support zone around the 1.36 handle. The sellers
piled in more aggressively and extended the drop into the 1.34 price region.
The next key level comes around the 1.3420 level where we can expect the buyers
to step in with a defined risk below it to position for a correction back into
the 1.36 handle.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that from a risk management perspective, the sellers will have a better
risk to reward setup around the trendline where they will also find the confluence
of the 38.2% Fibonacci
retracement level. The buyers, on the other hand, will want to see the
price breaking above the trendline to position for a rally into the 1.36
resistance zone.

USDCAD Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can
see more clearly the big push lower on Friday triggered by Powell’s speech. There’s
not much else we can glean from this timeframe as the sellers will likely wait
for a pullback into the trendline, while the buyers will look for a break above
it. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US Consumer Confidence report. On Thursday, we get the
latest US Jobless Claims figures. On Friday, we conclude with the US PCE
report.

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