We continue to hear from Fed members that two or more rate hikes are likely this year if data remains strong. In fact, since the last FOMC meeting, the data has indeed remained surprisingly to the upside and led to a more hawkish repricing of interest rate expectations that ultimately favored the greenback. On the other hand, the BoC surprised with a rate hike at the last meeting citing stubbornly rising inflation with the market anticipating another BoC hike, but the recent failure of the Canadian CPI report has made the market less certain about that.
Technical analysis of the USD/CAD pair – daily time frame
USDCAD daily
On the daily chart, we can see that USDCAD finally rose again above the key level of 1.3225. Was this fake? We’ll see in the coming weeks. Sellers now have the red MA 21 and handle 1.33 as deal resistance for further downside with risks defined above the level. Buyers will need to break above the 1.33 handle to get more conviction of more upside and extend the rally to 1.34.
Technical analysis of the USD/CAD pair – 4-hour time frame
USDCAD 4 hours
On the 4 hours chart, we can see that the price is diverging with the MACD of the entire bearish move since 1.34. This is generally a sign of weak momentum that is often followed by pullbacks or reversals. In this case, since the price also broke above the trend line and the moving averages crossed to the upside, we might get a larger pullback towards handle 1.34 where we can also find the 61.8% Fibonacci retracement level.
Technical analysis of the USD/CAD pair – 1 hour time frame
USDCAD 1 hour
On the hourly chart, we can see that the price is consolidating just above 1.3225. This will be a major support area for the buyers now as they can accumulate with a defined risk below the 38.2% Fibonacci retracement level, targeting the 1.34 handle. On the other hand, the sellers will need the price to have convincedly broken below the support area to jump on board and extend the eventual sell-off towards a new low. Today, we have the US PCE report, and the flapping should lead to some weakness in the US dollar, while the flapping should strengthen it.