USDCAD Technical Analysis – Watch out for this reversal risk


  • The Fed hiked by 25 bps as
    expected and kept everything unchanged.
  • Fed Chair Powell reaffirmed their data dependency
    and kept all the options on the table.
  • The US economic data keeps on surprising to the
    upside, but inflation expectations and CPI readings continue to show
    disinflation with the last two Core CPI M/M figures
    coming in at 0.16%.
  • The US PMIs missed
    expectations across the board and brought down Treasury yields weakening the US
    Dollar, but the US Jobless Claims came out
    better than expected once again and supported the USD.
  • At the moment, the market doesn’t expect another
    hike from the Fed, but the next NFP and CPI data will be crucial to confirm or
    change this view.


  • 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 Canadian underlying inflation
    data beat expectations on all measures for the June readings and last week we
    got another beat for the July data.
  • On the labour market side, the last
    report showed that the unemployment rate increased once again, but the average hourly earnings surprised to the upside as well.
  • The Canadian Core Retail Sales missed expectations.
  • Overall, it’s a mixed picture for
    the BoC.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD has been
rallying non-stop since the beginning of August and the breakout above the trendline
increased the bullish pressure even more. The pair recently broke above the
1.3553 resistance and it’s
now eyeing the next resistance at 1.3664. The trend remains firmly bullish as
the price keeps printing higher highs and higher lows with the moving averages being
crossed to the upside. The sellers will need to wait for some strong break of
key levels before considering new shorts.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that USDCAD keeps
on diverging with the
MACD as it
heads towards new highs. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. Up to now, we only got pullbacks into
previous swing levels and recently into the black trendline. If we
get another pullback, we can expect the buyers to lean on the trendline again
to position for more upside. The sellers, on the other hand will want to see
the price breaking through the trendline signalling a reversal this time and pile
in to target a selloff into the 1.34 handle.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that
there’s not much to work on as the price action remains choppy with a bullish
tilt. The buyers are likely to pile in even more if the price breaks above the
recent high at 1.3604 to target the 1.3664 resistance. The sellers should just
wait for the price to either reach the resistance or break through the

Upcoming Events

Today the only major
event is Fed Chair Powell’s speech at the Jackson Hole Symposium. The
expectations though are for him to take a “wait and see” approach as we have
more key economic data ahead before the next FOMC meeting.

This article was written by FL Contributors at Source