USDCAD Technical Analysis – Watch out for Canadian CPI today


  • The Fed left interest rates unchanged as expected at the last meeting.
  • The macroeconomic projections were revised higher,
    and the Dot Plot showed that the FOMC still expects another rate hike by the
    end of the year with less rate cuts projected in 2024.
  • Fed Chair Powell reaffirmed their data dependency but added that
    they will proceed carefully.
  • The US CPI last week beat expectations on the
    headline figures, but the core measures came in line with forecasts and the
    market’s pricing barely changed.
  • The labour market remains fairly solid as seen once again last week
    with the beat in Jobless Claims, although continuing claims surprisingly missed.
  • The US PMIs
    recently showed that the US economy remains pretty resilient.
  • The University of Michigan Consumer Sentiment report last Friday missed across the
    board with the inflation expectations figures spiking back up.
  • The Fed members continue to cite elevated long-term
    yields as a reason to proceed carefully and will likely pause in November as
  • The market doesn’t expect the Fed to hike anymore.


  • 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 underlying inflation data remains elevated.
  • The Canadian underlying inflation,
    in fact, has been beating expectations month after month with another beat across the board last month.
  • On the labour market side, the recent
    report beat expectations and showed another uptick in wage growth, which is something that Governor
    Macklem said the BoC is watching carefully.
  • The market doesn’t expect the BoC to
    hike at the upcoming meeting, but the central bank is not afraid to deliver
    surprising decisions.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the USDCAD pair
almost erased the rally following the US CPI release as BoC Governor Macklem
delivered a hawkish speech in which it looks like the central bank could
squeeze another rate hike if the underlying inflation data continues to beat
expectations. The divergence between
the latest leg higher and the MACD points
to a likely correction into the trendline around
the 1.35 handle.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair
reached the 61.8% Fibonacci retracement level
following the US CPI release and started to slowly erase the gains as the
market is likely positioning for a surprising BoC rate decision next week if
today’s CPI data beats forecasts. The support zone around
the 1.3620 will be key for the next direction as a strong bounce should see
more buyers piling in and position for a rally into new highs, while a break
lower should see the sellers piling in more aggressively and extend the drop
into the trendline around the 1.35 handle.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
recently got a small bounce that eventually got rejected from the previous
support turned resistance around the 1.3635 level. Nonetheless, the price broke
above the counter-trendline and the moving averages
crossed over, so it could be a sign that the bullish momentum is prevailing,
although the buyers will need a break above the 1.3635 level to confirm it. A
fall back below the counter-trendline and a break below the support would
invalidate the bullish setup and likely lead to more selling pressure.

Upcoming Events

Today we will see the latest Canadian inflation
figures which will be very important for the BoC ahead of their monetary policy
meeting next week. The market is likely to focus on the core measures as those
are the ones the BoC is watching carefully to decide on what do to next on the
policy front. Later in the day we will also get the US Retail Sales data where
it will be interesting to see if consumers spending is starting to slow or it’s
still holding on. On Thursday, we will get another US Jobless Claims report,
but we will also hear from Fed Chair Powell where the market will be focused on
any hint about the near term policy outlook. Finally, on Friday, we will see
the Canadian Retail Sales figures.

This article was written by FL Contributors at Source