USDCAD Technical Analysis – Range-bound price movement continues

Basic overview

The USD saw a quick decline across the board last week following the weak US CPI report as the market priced in two rate cuts by the end of the year. However, the moves soon reversed as we got a slightly more hawkish than expected FOMC decision, where the dot chart showed that the Fed only expected one rate cut this year despite the weak US CPI report.

Later, Fed Chair Powell backtracked on the forecasts, making them somewhat less worrying as the central bank remains highly data-dependent. The US dollar finally found support in the second half of last week as risk sentiment turned more cautious.

The CAD, on the other hand, was under some pressure as the Bank of Canada made a slightly more dovish rate cut than expected. Overall, the central bank said it remained data-dependent and expectations regarding rate cuts had not changed significantly.

The next Canadian Consumer Price Index (CPI) will be important as it could weigh on the Loonie again if it comes in surprisingly negative. However, trading against the US dollar might not be optimal as the pair could simply continue to fluctuate due to some risk appetite.

USDCAD Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDCAD was rejected from the resistance around the 1.3785 level as sellers stepped in to position themselves for a drop to the key 1.36 support zone. From a risk management perspective, it would be better for buyers to wait for the price to eventually reach the support to position themselves for a rally to new highs with a better risk-reward ratio.

USDCAD Technical Analysis – 4-hour Timeframe

On the 4-hour chart, we can more clearly see price action within a range between the support at 1.36 and the resistance at 1.3785. Buyers will want to see an upside breakout to increase their bullish bets on the next resistance at 1.3860. Sellers, on the other hand, will need a price break below the support zone to look for new lows, with the 1.34 level being the first target.

USDCAD Technical Analysis – 1-Hour Timeframe

On the 1-hour chart, we can see that we have a strong minor support zone around the 1.3710 level. This is where buyers could lean in to make a break above resistance with a better risk-reward ratio. Sellers, on the other hand, will want to see a price pullback to extend their bearish bets to the 1.3680 level next. The red lines define the average daily range for today.

Upcoming catalysts

Tomorrow we have the numbers on US housing starts, building permits and US jobless claims. On Friday we end the week with Canadian retail sales and US PMIs.