USDCAD Technical Analysis – Time for a bigger correction?

<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.</li><li>Fed Chair Powell reaffirmed their data dependency
and kept all the options on the table.</li><li>The US economic data keeps on surprising to the
upside, but inflation expectations and CPI readings continue to show
disinflation with the last two <a href="https://www.forexlive.com/news/us-june-cpi-02-mm-versus-02-mm-expected-20230810/">Core CPI M/M</a> figures
coming in at 0.16%. </li><li>The <a href="https://www.forexlive.com/news/us-august-sp-global-services-flash-pmi-510-vs-522-expected-20230823/">US PMIs</a> missed
expectations across the board last week, while the US Jobless Claims remained
solid. </li><li>Fed Chair Powell’s speech at the <a href="https://www.forexlive.com/news/jackson-hole-roundup-what-did-the-central-banksters-say-20230828/">Jackson Hole Symposium</a> was
mostly in line with what he said previously but he stressed on the need to be
careful going forward and that continued strength in the labour market may
require further rate hikes. </li><li>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. </li></ul><p>Canada:</p><ul><li>The BoC <a href="https://www.forexlive.com/centralbank/bank-of-canada-raises-rates-by-25-basis-points-to-50-20230712/">hiked rates by 25 bps</a> as expected at the last meeting as
the central bank doesn’t like the persistently high underlying inflation with a
tight labour market. </li><li>In the recently released <a href="https://www.forexlive.com/centralbank/boc-minutes-debated-not-hiking-at-the-july-12-meeting-20230726/">Meeting Minutes</a> the BoC seems less in a rush to
hike rates again. </li><li>The Canadian underlying inflation
data beat expectations on all measures for the June readings and last week 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 last
report showed that the unemployment rate increased once again, but the <a href="https://www.forexlive.com/news/canada-july-employment-change-64k-versus-211-k-estimate-20230804/">average hourly earnings</a> surprised to the upside as well. </li><li>The Canadian Core <a href="https://www.forexlive.com/news/june-canada-retail-sales-01-vs-00-expected-20230823/">Retail Sales</a> missed expectations.</li><li>Overall, it’s a mixed picture for
the BoC.</li></ul><p>USDCAD Technical Analysis –
Daily Timeframe</p><p>On the daily chart, we can see that USDCAD keeps on
rallying with almost no pullbacks. The bullish momentum has been relentless,
and the pair broke out of many key <a href="https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/">resistance</a> levels.
The next resistance comes at 1.3664 and a break above it would open the door
for the 1.3862 level. </p><p>USDCAD Technical Analysis –
4 hour Timeframe</p><p>On the 4 hour chart, we can see that the pair has
been <a href="https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/">diverging</a> with the
<a href="https://www.forexlive.com/Education/technical-analysis-understanding-macd-20220427/">MACD</a> for a
long time. This is generally a sign of weakening momentum often followed by
pullbacks or reversals. In this case, we only got the pullbacks, and we can see
that we have a strong upward <a href="https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/">trendline</a> where we
can expect the price to bounce off of next. </p><p>In fact, we have a good support level at the
trendline as there’s also the <a href="https://www.forexlive.com/Education/technical-analysis-confluence-20220318/">confluence</a> with the
previous <a href="https://www.forexlive.com/Education/technical-analysis-polarity-20220408/">resistance now turned support</a> and the
61.8% <a href="https://www.forexlive.com/Education/technical-analysis-using-fibonacci-retracements-20220421/">Fibonacci retracement</a> level.
This is where we can expect the buyers to pile in with a defined risk below the
trendline to target a new high. The sellers, on the other hand, will want to
see the price breaking below the trendline to confirm a reversal and position
for a deeper correction into the 1.34 handle. </p><p>USDCAD Technical Analysis –
1 hour Timeframe</p><p>On the 1 hour chart, we can see that we
have an interesting zone around the 1.36 handle where the price has been
struggling to break through except the upward spike during the Fed Chair
Powell’s speech at the Jackson Hole Symposium. Therefore, if we see the price
breaking above the level, we can expect the buyers to push the pair into the
1.3664 resistance. </p><p>Upcoming Events</p><p><a href="https://www.forexlive.com/EconomicCalendar">This week</a> is an important one given that we will see
many key labour market data for the US, including the NFP, before the next FOMC
meeting. Today, we have the US Consumer Confidence and the US Job Openings
reports. Tomorrow, we have the US ADP report. Moving on to Thursday, we will
see the US Jobless Claims and the US PCE data. Finally, we conclude the week
with the US NFP and the ISM Manufacturing PMI on Friday. Although the Fed keeps
all the options on the table, it’s also leaning more towards a pause in September,
so we will need strong data to make the market to expect a hike at the upcoming
meeting. </p>

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