On the daily chart below for USDCAD, we can see that after reaching the top at 1.3862, the market fell as the failure of the Silicon Valley Bank and the fears around the banking sector made the market to reprice lower future interest rates expectations dragging the US Dollar down with it.
The market then started to consolidate at the 1.3664 support level where we have also the 38.2% Fibonacci retracement level. This support zone held strongly but the price is now threatening a breakout.
On the 4 hour chart below, we can see how well this support zone held the several tries from the sellers of breaking it. The recent selloff came after the hot US PMIs data, which is odd since good data, especially after the banking crisis, should be good for the US Dollar.
This may be just a squeeze on dollar longs, but it’s hard to get a clear picture in today’s environment. Nonetheless, the buyers should step in here to defend the level with a defined risk below the zone. The sellers, on the other hand, will try to finally get the breakout and in case they succeed, the next target should be the 1.35 handle.
On the 1 hour chart below, we can see that the price is losing some momentum right at the support. The sellers may need a fundamental catalyst to get enough strength to break lower. The moving averages are crossed to the downside, so the trend on this timeframe is clearly downwards. Conservative buyers may want to wait for the price to bounce from this support and break above the trendline before piling in.
