USDCAD Technical Analysis – Key levels in sight

<p>US:</p><ul><li>The Fed <a href="https://www.forexlive.com/centralbank/federal-reserve-interest-rate-decision-25-bps-rate-hike-to-525-550-20230726/">hiked by 25 bps</a> as
expected and kept everything unchanged at the last meeting.</li><li>Fed Chair Powell reaffirmed their data dependency
and kept all the options on the table.</li><li>The <a href="https://www.forexlive.com/news/us-august-cpi-06-mm-versus-06-mm-expected-20230913/">US CPI</a> last
week came in line with expectations, so the market’s pricing remained roughly
the same. </li><li>The <a href="https://www.forexlive.com/news/us-august-non-farm-payrolls-187k-vs-170k-expected-20230901/">labour market</a>
displayed signs of softening although it remains fairly solid.</li><li>The other important economic data like the ISM
Services PMI, Jobless Claims and Retail Sales all beat expectations recently. </li><li>The Fed members are leaning towards a pause in
September and the next decision will still be dictated by the economic data. </li><li>The market doesn’t expect the Fed to hike at the
September meeting, but there’s now basically a 50/50 chance of a hike in
November.</li></ul><p>Canada:</p><ul><li>The BoC <a href="https://www.forexlive.com/centralbank/bank-of-canada-holds-rates-at-500-as-expected-20230906/">left interest rates at 5.00%</a> as expected but remains prepared to
raise rates further if needed.</li><li>BoC Governor Macklem delivered a <a href="https://www.forexlive.com/centralbank/bocs-macklem-we-are-concerned-that-progress-in-bringing-down-inflation-has-slowed-20230907/">hawkish speech</a> which points to another rate hike
if the data remains strong into the next policy meeting. </li><li>The Canadian underlying inflation
data beat expectations on all measures for the June readings and recently we
got <a href="https://www.forexlive.com/news/canada-july-cpi-33-yoy-versus-30-expected-20230815/">another beat</a> for the July data. </li><li>On the labour market side, the recent
report showed another uptick in <a href="https://www.forexlive.com/news/canada-august-employment-399k-vs-150k-expected-20230908/">wage growth</a> and this is something that Governor
Macklem said the BoC is watching carefully.</li><li>The market doesn’t expect the BoC to
hike again, but we still have lots of data before the next meeting.</li></ul><p>USDCAD Technical Analysis –
Daily Timeframe</p><p>On the daily chart, we can see that since tapping
into the key 1.3668 <a href="https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/">resistance</a>, the
USDCAD pair has been moving lower almost every single day. Given the
overstretched levels and the <a href="https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/">divergence</a> with the
<a href="https://www.forexlive.com/Education/technical-analysis-understanding-macd-20220427/">MACD</a> right at
the resistance, a pullback was to be expected, but the recent break of the
higher low at 1.3489 and the crossover of the <a href="https://www.forexlive.com/Education/technical-analysis-understanding-moving-averages-20220425/">moving averages</a> brings
into question the overall trend. </p><p>USDCAD Technical Analysis –
4 hour Timeframe</p><p>On the 4 hour chart, we can see that we had a
massive divergence with the MACD since the beginning of August that culminated
at the key resistance. The pair is now threatening a break of the higher low at
1.3489 where we can also find the 38.2% <a href="https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/">Fibonacci retracement</a> level of
the entire rally into the 1.3668 resistance. The sellers have been in complete
control since the strong Canadian wage growth data and recently leant on the
red 21 moving average to position for further downside. Lower than expected
inflation figures today might invalidate the breakout and push the pair to the
upside again. A break below the Fibonacci level though, should see another
selloff into the 1.34 support. </p><p>USDCAD Technical Analysis –
1 hour Timeframe</p><p>On the 1 hour chart, we can see that we
have another divergence with the MACD right at the support zone. This might be
a signal that we are about to see a turnaround, but the price will need to
break above the trendline to confirm a reversal. A break of the <a href="https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/">trendline</a> should
see more buyers piling in and increase the bullish momentum with the 1.3668
resistance being the first target. </p><p>Upcoming Events</p><p><a href="https://www.forexlive.com/EconomicCalendar">This week</a> has just a couple of important economic
releases with the FOMC rate decision tomorrow being the highlight. Today, we
will see the latest Canadian CPI with the market likely focusing more on the
core measures since that’s what the BoC is more concerned with. Tomorrow, the
Fed is expected to keep rates unchanged, and the market will focus more on the
Dot Plot and Fed Chair Powell’s press conference, although he’s likely to
repeat that they remain data dependent. Moving on to Thursday, we will see
another US Jobless Claims report, while on Friday we conclude the week with the
US PMIs data. </p>

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