We keep hearing from the Fed members that two or more rate hikes this year are likely if the data remains solid. In fact, since the last FOMC meeting, the data indeed kept on surprising to the upside and led to a more hawkish repricing in interest rates expectations that eventually favoured the greenback. On a different note, the BoC surprised with a rate hike at the last meeting citing stubbornly high inflation with the market expecting another hike from the BoC, but the recent miss in the Canadian CPI report made the market a bit less certain on that.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD has eventually rallied back above the key 1.3225 level. Was this a fakeout? We will see in the next weeks. The sellers now have the red 21 moving average and the 1.33 handle as resistance to position for more downside with a defined risk above the level. The buyers will need to break above the 1.33 handle to get more conviction for further upside and extend the rally to the 1.34 level.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been diverging with the MACD for the whole downside move since 1.34. This is generally a sign of a weakening momentum often followed by pullbacks or reversals. In this case, given that the price has also broke above the trendline and the moving averages have crossed to the upside, we may get a bigger pullback into the 1.34 handle where we can also find the 61.8% Fibonacci retracement level.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is consolidating just above the 1.3225 level. This will be a key support zone for the buyers now where they can pile in with a defined risk below the 38.2% Fibonacci retracement level and target the 1.34 handle. The sellers, on the other hand, will need the price to break with conviction below the support zone to jump onboard and extend the eventual selloff towards a new low. Today, we have the US PCE report, and a miss should lead to some USD weakness, while a beat should strengthen it.
