Fundamental Overview
The USD got a boost last week from the strong US PMIs which lifted Treasury yields and put in question the rate cut in September. Once the market digested the report though and saw that there was more good news on the growth side than bad news on inflation, the USD strength faded as the risk-on sentiment ensued.
The CAD, on the other hand, got pressured 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.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD sold off all the way back to 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 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 got a fakeout last week above the downward trendline after the strong US PMIs data. The market faded the USD strength the following day as the positive risk sentiment supported the CAD.
From a risk management perspective, the sellers will have a better risk to reward setup around the 38.2% Fibonacci retracement level where they can target the break below the support with a defined risk above the downward trendline. The buyers, on the other hand, will want to see the price breaking the downward trendline again to increase the bullish bets into the 1.39 handle.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have the upper limit of the average daily range near the 38.2% Fibonacci retracement level and the swing high at 1.3671. That zone is going to be a resistance now with a break above it giving the buyers more control.
Upcoming Catalysts
Today we get the Canadian PPI and the US Consumer Confidence report where the focus will likely be on the labour market details. On Thursday, we will see the latest US Jobless Claims figures. Finally on Friday, we conclude the week with the Canadian GDP and the US PCE reports.
