Fundamental Overview
The USD has been generally under pressure since the benign US CPI report last week as the hawkish expectations subsided and the market switched its focus from inflation back to growth. This triggered a positive risk sentiment with risk assets like stocks and bitcoin gaining ground. Such an environment is generally negative for the greenback.
The CAD should remain overall supported, but we will get the Canadian CPI report today and that might weigh on it in the short-term if the data surprises to the downside. In the bigger picture, the pair might keep falling as the risk-on sentiment from falling inflation and positive growth impulse weighs on the US Dollar.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD consolidated right at the key support zone around the 1.36 handle where we can also find the confluence of the trendline and 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 back into the cycle highs around the 1.39 handle. The sellers will want to see the price breaking lower 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 in case we get a bigger correction from the support, the sellers will have a good risk to reward setup around the 1.37 handle where there’s the confluence of the downward trendline and the 61.8% Fibonacci retracement level.
The buyers, on the other hand, will want to see the price breaking above the trendline to invalidate the bearish setup and increase the bullish bets into the cycle highs.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have an important level at 1.3642 where the price got rejected from several times. A breakout to the upside should see the buyers increase the bullish bets into the downward trendline. Notice though that the upside limit of the average daily range today is around the 1.3666 level, so barring any big surprise in the data, the pair is unlikely to extend above that level today.
Upcoming Catalysts
Today we get the Canadian CPI report where the data is unlikely to change much for the CAD although it could weigh or boost it in the short-term. On Thursday, we will see the latest US PMIs and Jobless Claims figures. Finally, on Friday, we conclude the week with the Canadian Retail Sales data.
