USDCAD Technical Analysis – Key Levels to Watch in the Event of a Pullback

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.
• 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.
• The US ISM Manufacturing PMI significantly exceeded expectations, as the price component continued to rise, while the US ISM Services PMI missed expectations, with the price index falling to a 4-year low.
• U.S. retail sales far exceeded expectations across the board, with positive revisions from previous figures.
• The market now 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 moved back into the blue moving average of 8 and rebounded as buyers positioned themselves for a rally to new highs. From a risk management perspective, buyers will have much better risk to reward a setup around the 38.2% Fibonacci retracement level and even better around the 61.8% Fibonacci retracement level as they will also find the confluence of previous resistance turned support.

USDCAD Technical Analysis – 4 Hour Timeframe

On the 4-hour chart, we can see that besides the 38.2% Fibonacci retracement level, we can also find a trendline adding confluence around the 1.37 handle. This is where we can expect buyers to step in with defined risk below the trendline to position themselves for a rally to new highs. Sellers, on the other hand, will want to see the price move lower to accumulate and target a decline to the 61.8% Fibonacci retracement level.

USDCAD Technical Analysis – 1 Hour Timeframe

On the hourly chart we can see that price has diverged with the MACD, which is usually a sign of weakening often followed by pullbacks or reversals. The price has fallen below trendline support, so we are more likely to see a decline to the main trendline. We now have a black counter-trend line acting as resistance, so if price reaches there we can expect sellers to step in to position themselves for a decline in the main trend line. If the price were to break higher, buyers would likely rally to position themselves for a rally to new highs.