USDCAD Technical Analysis – A breakout of this trendline can lead to a big move

week, the US CPI came
basically in line with expectations, but the good news is that the Core M/M
reading once again printed at 0.2%. The less good news is that the US Initial Claims spiked
higher, but Continuing Claims remained solid. We have already seen Claims
spiking higher in the past months, so it shouldn’t be worrying yet. The
long-term inflation expectations in the University of Michigan report
ticked lower, so on the data side the soft-landing narrative was supported. The
US Dollar, nonetheless, appreciated across the board as the attention may have
turned already on the next data given the higher energy prices and China starting to stimulate more.

On the other hand, the BoC hiked rates by 25 bps as expected at the last meeting as
the central bank doesn’t like the persistently high underlying inflation with a
tight labour market. In the recently released Meeting Minutes the BoC seems less in a rush to
hike rates again. The recent Canadian underlying inflation data beat expectations on all
measures, and while the unemployment rate increased once again, the average hourly earnings surprised to the upside. Overall,
it’s a mixed picture for the BoC but it should be more skewed to the hawkish

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD is
threatening a breakout of a key trendline. In
fact, a breakout should open the door for much higher levels with the first one
standing at 1.3553. The sellers should step in here with a defined risk above
the high to target the 1.3225 support again.
The bias remains bullish but the risk of a pullback after such a big rally is

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the buyers
keep on leaning on the red 21 moving average as a
dynamic support. We are likely to see more coming in here and target the break
above the recent high at 1.3500. In fact, the sellers will need the price to
fall below the 1.3400 handle to have more conviction and target the 1.33

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the price action and how the buyers remain in control. The levels to
watch are the high at 1.35 and the black trendline as a break below it would
see more sellers piling in, given the fakeout, and target the 1.33 handle.

Upcoming Events

This week is a
bit empty on the data front. Today we will see the latest US Retail Sales
report where the USD is likely to appreciate in case of a beat and pull back in
case of a miss. At the same time, we will also see the Canadian CPI report
where a miss should support the BoC pause, and a beat may make them
uncomfortable holding rates steady. The US Jobless Claims on Thursday is likely
to be the main event of the week as another big miss may cause recessionary
fears and send the market into risk off, while strong data should keep the USD
strong as any dovish bet should be put aside.

This article was written by FL Contributors at Source