The Fed last week paused
its tightening cycle leaving interest rates at 5.00-5.25%. The FOMC wants to
see more economic data before deciding on another rate hike as they are trying
to fine tune their policy to get to a sufficiently restrictive level to bring
inflation down without too much economic pain. The BoC, on the other hand,
surprised recently with a rate hike as they are not satisfied with the disinflationary
trend in the first quarter of 2023 and judged appropriate to raise the interest
rate.
USDCAD Technical Analysis –
Daily Timeframe
USDCAD Daily
On the daily chart, we can see that the USDCAD has
probed below the key 1.3225 support level
and pulled back as sellers couldn’t sustain the momentum. We can see that the
price has overextended from the blue 8 moving average and what
generally follows is a consolidation or a pullback into the moving average before
the next move. A good resistance level for the sellers to re-enter the market
would be the 1.33 level.
USDCAD Technical Analysis –
4 hour Timeframe
USDCAD 4 hour
On the 4 hour chart, we can see that USDCAD has
been diverging with the
MACD falling
into the 1.3225 support. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, we may first get the pullback
into the trendline and the
61.8% Fibonacci retracement level,
which would also have confluence with the
daily 8 moving average. The sellers are expected to lean on that level with a
defined risk just above the 1.33 handle.
USDCAD Technical Analysis –
1 hour Timeframe
USDCAD 1 hour
On the 1 hour chart, we can see that at
the moment USDCAD has found resistance at a previous swing high level at
1.3239. The price will need to break above this level to then rally into the
1.33 resistance zone. Otherwise, we may see the sellers already piling in here
targeting a new lower low. The buyers can either ride the likely rally from the
1.3240 breakout to the trendline or wait for the price to break above the 1.33
resistance to get the conviction for a bigger rally into the 1.3450 level.
This week is
relatively empty on the data front with just the US Jobless Claims on Thursday
and the US PMIs on Friday. Nonetheless, we will hear from many Fed members and
even from Fed Chair Powell as he will testify before Congress on Wednesday and
Thursday.