USDCAD Technical Analysis – Getting Closer to a Key Support Zone

USD

• The Fed left interest rates unchanged as expected at the last meeting, with virtually no change in its statement. The Dot Plot showed three more rate cuts for 2024 and the economic projections were improved with higher growth and inflation and lower unemployment.
• U.S. first-quarter GDP surprisingly beat expectations, although its main components nonetheless showed a strong economy. Core PCE, however, was surprised on the upside, pushing rate cuts further.
• The US CPI beat expectations for the third consecutive month, while the US PPI was in line with forecasts.
• U.S. NFP beat expectations across the board, although average hourly earnings were in line with forecasts.
• US April PMIs missed expectations, with commentary pointing to weaker inflationary pressures but also an increase in layoffs.
• The market expects a first rate cut in September.

GUJAT

• The Bank of Canada left interest rates unchanged at 5.00%, as expected, changing a line in the press release that indicated less concern about inflation and therefore the possibility of a cut in June if the trend remains intact.
• The latest Canadian CPI came in line with expectations, even as underlying inflation measures eased further.
• On the labor market side, the latest report fell short of expectations across the board, although we did see a slight uptick in wage growth, a phenomenon the Bank of Canada is monitoring closely.
• The Canadian manufacturing PMI improved slightly in March, while the services PMI weakened further. Both measures remain in contraction territory.
• The market expects a first rate cut in June.

USDCAD Technical Analysis – Daily Timeline

On the daily chart, we can see that USDCAD is moving ever closer to the key support zone around the 1.3620 level where we can also find the 61.8% Fibonacci retracement level for the confluence. This will be the first opportunity for buyers, followed by the second around the major trendline should the price break below the support at 1.3620. Sellers, on the other hand, will continue to push on each downside breakout, and if they manage to break above the trendline, the next target will be the low of 1.3225.

USDCAD Technical Analysis – 4 Hour Timeframe

On the 4-hour chart, we can see that yesterday’s price was rejected from the minor downtrend line as sellers stepped in to increase bearish bets towards new lows. Buyers will need to break through the minor trendline and resistance zone at 1.3730 to reverse the trend and start aiming for new highs.

USDCAD Technical Analysis – 1 Hour Timeframe

On the hourly chart we can see that we have a minor resistance area around the 1.3665 level where the red 21 moving average for the confluence is also located. This is where we can expect sellers to step in again with risk set above resistance to increase bearish bets towards new lows. Buyers, on the other hand, will want to see the price move higher to position themselves for a rally within the trendline and target a breakout above it.

Events to come

Today we wrap up the week with the US PCE report.