USDCAD Technical Analysis – We got a breakout!

USD

• The Fed left interest rates unchanged as expected at the last meeting with basically no
  change to the statement. The Dot Plot still showed three rate cuts for 2024 and
  the economic projections were upgraded with growth and inflation higher and the
  unemployment rate lower.
• The US CPI beat expectations for the third
  consecutive month, while the US PPI came in line with forecasts.
• The US NFP beat expectations across the board
  although the average hourly earnings came in line with forecasts.
• The US ISM Manufacturing PMI beat expectations by a big margin with
  the prices component continuing to increase, while the US ISM Services PMI missed with the price index dropping to
  the lowest level in 4 years.
• The market now expects the first rate cut in
  September.

CAD

• The BoC left interest rates unchanged at
  5.00% as expected changing a line in the statement that indicated less concern
  about inflation and thus the possibility of a cut in June if the trend remains
  intact.
• The latest Canadian CPI missed expectations across the
  board with the underlying inflation measures falling.
• On the labour market side, the latest report missed
  expectations across the board although we saw an uptick in wage growth which is
  something that the BoC is watching closely.
• The Canadian Manufacturing PMI
  improved slightly in March while the Services PMI weakened further. Both the
  measures remain in contractionary territory.
• The market expects the first rate
  cut in June.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD broke
through the key 1.3620 resistance following
another hot US CPI report and extended the rally above the upper bound of the
channel. This has opened the door for a rally into the 1.3862 resistance, so
the buyers will look for dip-buying opportunities on the lower timeframes. The
sellers, on the other hand, will want to see the price breaking key levels to
position for new lower lows.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price
looks to be struggling a bit maintaining the bullish momentum after such a
strong run. From a risk management perspective, the buyers will have much
better risk to reward setups around the 38.2% Fibonacci retracement level
and the 61.8% Fibonacci level where there’s also the trendline for confluence. The
sellers, on the other hand, will look for breaks below those levels to pile in
and position for new lower lows.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
latest leg higher is diverging with
the MACD, which
is generally a sign of a weakening momentum often followed by pullbacks or
reversals. In this case, it could be a signal for a pullback into the base of
the divergent formation around the 1.3660 level where we have also the 38.2%
Fibonacci level. That’s where we can expect the buyers to step in with a
defined risk below the level to position for a rally into new highs. The
sellers, on the other hand, will look for a break lower to position for a drop
into the trendline.

Upcoming Events

Today we conclude the week with the University of
Michigan Consumer Sentiment Survey.