USDCAD Technical Analysis – We Had a Breakout!

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 beat 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.
• 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 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 missed expectations across the board, with underlying inflation measures falling.
• 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 broke key resistance at 1.3620 following another hot US CPI report and extended the rally above the channel’s upper boundary. This has opened the door for a rally towards resistance at 1.3862, so buyers will be looking for dip buying opportunities on lower time frames. Sellers, on the other hand, will want to see price break through key levels to position themselves for new lows.

USDCAD Technical Analysis – 4 Hour Timeframe

On the 4-hour chart, we can see that the price seems to be having a bit of trouble maintaining its bullish momentum after such an advance. From a risk management perspective, buyers will have a much better risk to reward setups around the 38.2% Fibonacci retracement level and the 61.8% Fibonacci level where the line of confluence trend. Sellers, on the other hand, will look for breaks below these levels to accumulate and position themselves at new lows.

USDCAD Technical Analysis – 1 Hour Timeframe

On the hourly chart, we can see that the latest rise diverges with the MACD, which is usually a sign of weakening momentum, often followed by pullbacks or reversals. In this case, this could be the signal for a pullback towards the base of the divergent formation around the 1.3660 level where we also have the 38.2% Fibonacci level. This is where we can expect buyers to step in with defined risk below the level to position themselves for a rally to new highs. Sellers, on the other hand, will look for a downside breakout to position themselves for a decline in the trendline.

Events to come

Today we wrap up the week with the University of Michigan Consumer Sentiment Survey.