USDCAD Technical Analysis – Key breakout in sight

<p>USD</p><ul><li>The Fed <a href="https://www.forexlive.com/news/fomc-decision-no-change-to-rates-2024-median-dot-46-vs-49-expected-20231213/">left interest rates unchanged</a> as expected at the last meeting with a shift in
the statement that indicated the end of the tightening cycle. </li><li>The latest <a href="https://www.forexlive.com/news/us-december-core-cpi-39-yy-versus-38-yy-expected-20240111/">US CPI</a> slightly beat expectations but analysts
expect the Core PCE to print at 0.2% M/M again following the CPI data. </li><li>The labour market continues to soften but remains
resilient with <a href="https://www.forexlive.com/news/us-initial-jobless-claims-187k-vs-207k-estimate-20240118/">US Jobless Claims</a> beating expectations week after week.</li><li>The latest <a href="https://www.forexlive.com/news/us-december-ism-manufacturing-pmi-474-vs-471-expected-20240103/">ISM Manufacturing PMI</a> beat expectations, while the <a href="https://www.forexlive.com/news/us-december-ism-services-506-vs-526-expected-20240105/">ISM Services PMI</a> missed by a big margin. </li><li>The <a href="https://www.forexlive.com/news/us-december-retail-sales-06-vs-04-expected-20240117/">US Retail Sales</a> beat expectations across the board.</li><li>The <a href="https://www.forexlive.com/news/us-january-umich-prelim-consumer-sentiment-788-vs-700-expected-20240119/">University of Michigan Consumer Sentiment</a> report jumped to the highest levels since
2021. </li><li>The Fed members recently have been pushing
back on the aggressive rate cuts expectations.</li><li>The market’s expectations for the first rate cut
were pushed back to May following strong economic data.</li></ul><p>CAD</p><ul><li>The BoC <a href="https://www.forexlive.com/centralbank/bank-of-canada-holds-rates-at-500-as-expected-20231206/">kept the interest rate steady at
5.00%</a> as expected at the last meeting with
the usual caveat that it’s prepared to raise the policy rate further if needed.</li><li>The latest <a href="https://www.forexlive.com/news/canada-december-cpi-34-yy-vs-34-expected-20240116/">Canadian CPI</a> 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. </li><li>On the <a href="https://www.forexlive.com/news/canada-december-employment-01k-versus-135-k-estimate-20240105/">labour market</a> side, the latest report missed
expectations although wage growth spiked to the highest level since 2021.</li><li>The Canadian PMIs continue to fall
further into contraction as the economy keeps on weakening amid restrictive
monetary policy. </li><li>The market expects the BoC to start
cutting rates in Q2.</li></ul><p>USDCAD Technical Analysis –
Daily Timeframe</p><p>On the daily chart, we can see that USDCAD broke
through the key <a href="https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/">trendline</a> and
extended the rally into the 1.35 handle. This breakout opened the door for a
move into the swing high <a href="https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/">resistance</a> around
the 1.36 handle where we can also find the 61.8% <a href="https://www.forexlive.com/Education/technical-analysis-using-fibonacci-retracements-20220421/">Fibonacci retracement</a> level
for <a href="https://www.forexlive.com/Education/technical-analysis-confluence-20220318/">confluence</a>. The
buyers should keep on looking for dip-buying opportunities on the lower
timeframes while the sellers will want to see the momentum changing and some
key breaks before piling in more aggressively. </p><p>USDCAD Technical Analysis –
4 hour Timeframe</p><p>On the 4 hour chart, we can see that the price
broke through the key upward trendline but bounced from the 61.8% Fibonacci
retracement level. If the price were to make a new higher high, then the
fakeout would be confirmed and the buyers will likely pile in more aggressively
to target the 1.36 handle. </p><p>USDCAD Technical Analysis –
1 hour Timeframe</p><p>On the 1 hour chart, we can see that the price
got rejected from the downward trendline as the sellers stepped in to position
for a drop into new lower lows. The bearish momentum looks weak though and we
could see a break above the trendline which would see the buyers increasing
their bullish bets into the 1.36 resistance. </p><p>Upcoming Events</p><p><a href="https://www.forexlive.com/EconomicCalendar">This week</a> is a bit more tranquil on the data front with
the major releases scheduled for the final part of the week. We begin tomorrow
with the BoC rate decision and the US PMIs. On Thursday, we have the Advance US
Q4 GDP and the latest US Jobless Claims figures. Finally, on Friday we conclude
the week with the US PCE report.</p>

This article was written by FL Contributors at www.forexlive.com.