USDCAD Technical Analysis – Key breakout opens the door for much higher prices


  • The Fed left interest rates unchanged as expected at the last meeting with a shift in
    the statement that indicated the end of the tightening cycle.
  • The Summary of Economic Projections showed a
    downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
    was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
    in 2024 compared to just two in the last projection.
  • Fed Chair Powell didn’t push back against the strong dovish pricing
    and even said that they are focused on not making the mistake of holding rates
    high for too long.
  • The latest US CPI slightly beat expectations but analysts
    expect the Core PCE to print at 0.2% M/M again following the CPI data.
  • The US PPI missed expectations across the board
    supporting the disinflationary impulse.
  • The labour market continues to soften although Initial Claims keep on hovering around cycle lows while
    Continuing Claims are ranging at a higher level.
  • The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
  • The hawkish Fed members have been leaning
    on a more neutral side lately.
  • The market expects the Fed to start cutting rates
    in March 2024.


  • The BoC kept the interest rate steady at
    as expected at the last meeting with
    the usual caveat that it’s prepared to raise the policy rate further if needed.
  • BoC Governor Macklem recently has been leaning on a more
    neutral side and even started to talk about rate cuts although he remains
    uncertain on the timing.
  • The latest Canadian CPI beat expectations across the board with
    the underlying inflation measures remaining elevated, which should give the BoC
    a reason to wait for more data before considering rate cuts.
  • On the labour market side, the latest report missed
    expectations although wage growth spiked to the highest level since 2021.
  • The Canadian PMIs continue to fall
    further into contraction as the economy keeps on weakening amid restrictive
    monetary policy.
  • The market expects the BoC to start
    cutting rates in March 2024.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD broke
through the key trendline and
extended the rally into the 1.35 handle. This breakout opened the door for a
move into the swing high resistance around
the 1.36 handle. The buyers will look for dip-buying opportunities on the lower
timeframes while the sellers will want to see the momentum changing before
piling in more aggressively.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we have an
upward trendline now that will define the current uptrend. From a risk
management perspective, the buyers will have a much better risk to reward setup
around the trendline where they will also find the red 21 moving average for confluence. The sellers,
on the other hand, will want to see the price breaking lower to invalidate the
bullish setup and position for a drop into new lows.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have another minor trendline that should offer a good support for the buyers with
the red 21 moving average for extra confluence. If the price were to break
lower, the sellers will pile in and target the major upward trendline around
the 1.34 handle.

Upcoming Events

Today, we have the Canadian CPI report on the agenda
and later in the day all eyes will be on Fed’s Waller as the market will be
eager to see if he decides to pushback against the aggressive rate cuts
expectations. Tomorrow, we will get the US Retail Sales report while on
Thursday we will see the latest US Jobless Claims figures. On Friday, we
conclude the week with the Canadian Retail Sales data and the University of
Michigan Consumer Sentiment survey.

This article was written by FL Contributors at Source