USDCAD Technical Analysis – Time for a pullback?


  • The Fed left interest rates unchanged as
  • The macroeconomic projections were revised higher
    as the economy showed much stronger resilience than expected and the Dot Plot
    showed that the majority of members still expects another rate hike by the end
    of the year with less rate cuts in 2024.
  • Fed Chair Powell
    reaffirmed their data dependency but added that they will proceed carefully as
    they are trying to find the optimal level of rates. Powell also added that the
    soft landing is not the base case at the moment, although they are aiming for
  • The latest US Core PCE
    in line with expectations with disinflation continuing steady.
  • The labour market
    displayed signs of softening although it remains fairly solid as seen also last
    week with a strong beat in Jobless Claims.
  • The ISM Manufacturing PMI beat
    expectations yesterday in another sign that the US economy remains resilient.
  • The market doesn’t expect the Fed to hike again at
    the moment.


  • The BoC left interest rates at 5.00% as expected but remains prepared to
    raise rates further if needed.
  • BoC Governor Macklem delivered a hawkish speech which points to another rate hike
    if the data remains strong into the next policy meeting.
  • The Canadian underlying inflation
    data has been beating expectations month after month and last week we got another beat across the board.
  • On the labour market side, the recent
    report showed another uptick in wage growth and this is something that Governor
    Macklem said the BoC is watching carefully.
  • The market doesn’t expect the BoC to
    hike at the upcoming meeting.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the USDCAD pair
spiked lower towards the 1.34 support zone and
shot higher on Friday for no clear reason other than weakness in the oil market
and a flat GDP report. Such huge rallies get overstretched pretty fast as
depicted by the price distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that there’s no
clear level where to lean on, but the buyers might want to wait for the price
to pull back into the 38.2% Fibonacci retracement level
where they will also find the confluence with the
red 21 moving average and the 1.36 handle. The sellers, on the other hand,
might start to pile in around current highs to position for another drop into
the 1.35 support.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a minor divergence with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see a pullback into the previous resistance now
turned support
around the 1.3668 level where the buyers
are likely to step in with a defined risk below the support to target new
higher highs. The sellers, on the other hand, will want to see the price
breaking the support to pile in and position for a drop into the 1.36 handle
ultimately targeting the 1.35 support.

Upcoming Events

This week we have many key economic releases that will
culminate in the US NFP report on Friday. Today, we will have the US Job
Openings data which led to a strong selloff the last time as the big miss made
Treasury yields to fall due to less labour market tightness and less hawkish
Fed expectations. Tomorrow, it will be the time for the ADP report and the ISM
Services PMI. On Thursday, we will see the Jobless Claims data, which continues
to show a solid labour market. Finally on Friday, it will be the time for the
NFP report which is the only one the Fed will see before its next rate decision
and the Canadian Jobs data.

This article was written by FL Contributors at Source