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.
