On the daily chart below, the price is trading in a descending triangle with the support level at 1.3225. Generally, the price can breakout on either side of such chart pattern, so paying attention to the fundamentals will be helpful when looking for a direction.
The big move down in the pair from the peak at 1.3975 was caused by stretched long US Dollar positions being unwound as the market started to price lower inflation and earlier than expected Fed pause.
Since then, we got many economic reports that were both favourable and unfavourable for risk sentiment and the Canadian Dollar, which resulted in this kind of a compressing price action.
Recently, the huge beat in the NFP report and the ISM Services PMI reignited fears that inflation may not fall all the way back to 2% and the Fed may be forced to do more on the interest rates front. This triangle will be something to keep an eye on going forward.
On the 4 hour chart below, the price is currently trading in a range between the resistance at 1.3450 and the support at 1.3350. We got two head-fakes in the past weeks, but eventually the price returned into the range.
The market will be looking at next economic data to decide where to go next, with the US Jobless Claims today as the first risk event and the US CPI next week as the major event of the month as the fears on inflation returned.
On the 1 hour chart below, we can see more clearly how the price is trading within the range with minor trends happening as the price moves from the resistance to the support and back to the resistance.
The moving averages show these minor trends clearly: when the short-term blue moving average rises above the long-term red moving average, we see an uptrend and vice versa when the blue moving average falls below the red moving average.
In this case is better to stay out of the market, but one can also “play the range” selling at resistance and buying at support.
