USDCAD Technical Analysis – Month-end flows lead to a rangebound price action

Fundamental
Overview

The USD got a boost from
the strong US Consumer Confidence data which triggered an aggressive
rise in long term Treasury yields. The report however just showed that the
labour market remains resilient which is good news for growth and not
necessarily bad news for inflation. The greenback benefited also from the
risk-off sentiment which looks increasingly likely that it was caused more by
the month-end flows rather than a fundamental driver.

The CAD, on the other hand,
came a bit under pressure recently from the weaker than expected Canadian CPI figures which raised the chances of
a rate cut in June (although it remains basically a coinflip). The risk-on
sentiment though is supportive for commodity currencies like the CAD, so if it
this were to continue, we could see even more gains ahead for the Loonie.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD rallied after the US data and general risk-off sentiment. All
the gains were erased yesterday though as the sentiment started to change. It
looks like we will see the pair falling back to the key support zone around the 1.36 handle where we can also
find the confluence of the 61.8% Fibonacci retracement level.

This is where the buyers
keep stepping in with a defined risk below the support to position for a rally
into the 1.39 handle. The sellers will need to see the price breaking below the
support to gain more conviction and increase the bearish bets into the 1.34
handle.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a downward trendline
acting as resistance around the 1.3730 level. We can also notice that the price
has been printing consistently lower highs which is technically a sign of a downtrend.
It looks like the sellers have some control for now as the buyers will need the
price to break above the 1.3740 swing high to invalidate the bearish bias.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have the lower limit of the average daily range near the near the key support zone.
Overall, there’s not much to do here as traders will just keep on playing the
range until we get a breakout.

Upcoming
Catalysts

Today we conclude the week with the Canadian GDP and the US
PCE report.

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