USDCAD Technical Analysis – All eyes on the US CPI report today

USD

• The Fed left interest rates unchanged as
  expected while dropping the tightening bias in the statement but adding a
  slight pushback against a March rate
  cut.
• Fed Chair Powell stressed
  that they want to see more evidence of inflation falling back to target and
  that a rate cut in March is not their base case.
• The latest US GDP beat
  expectations by a big margin.
• The US PCE came
  mostly in line with expectations with the Core 3-month and 6-month annualised
  rates falling below the Fed’s 2% target.
• The US NFP report
  beat expectations across the board by a big margin.
• The ISM Manufacturing
  PMI
  surprised to the upside with the new orders index, which is considered a
  leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat
  expectations across the board with the employment sub-index erasing the prior
  drop and prices paid jumping above 60.
• The US Consumer
  Confidence report came in line with expectations but
  the labour market details improved considerably.
• The market now expects the first rate cut in May.

CAD

• The BoC left interest rates unchanged at
  5.00% as expected and dropped the language about being prepared to hike if
  needed.
• The latest Canadian CPI beat expectations across the board with
  the underlying inflation measures remaining elevated.
• On the labour market side, the latest report beat
  expectations but we saw a contraction in full-time employment and a fall in
  wage growth.
• The Canadian PMIs improved in
  January although they remain both in contractionary territory.
• The market expects the BoC to start
  cutting rates in June.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD remains
stuck in a big range between the 50% Fibonacci retracement level and
the resistance around
the 1.3540 level. There’s not much to do here other than waiting for a breakout
but in the meantime, traders can “play the range” by buying at support and
selling at resistance.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the pair recently
bounced on the 61.8% Fibonacci retracement level of the entire US NFP rally.
The sellers will want to see the price breaking lower to increase the bearish
bets into the 50% Fibonacci retracement level. The buyers, on the other hand,
will keep on stepping in around the 61.8% Fibonacci retracement level to
position for a rally into the 1.3540 resistance targeting a break above it.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the price
has been diverging with
the MACD
falling into the 61.8% Fibonacci retracement level. This is generally a sign of
weakening momentum often followed by pullbacks or reversals. In this case, it
might be a signal of an impending reversal, but the price will need to break
above the 1.35 handle to confirm it. In the meantime, we could have another
smaller range here.

Upcoming Events

Today we have the main event of the week, that is,
the US CPI report. On Thursday we will see latest US Jobless Claims figures and
the US Retail Sales. Finally, on Friday, we conclude the week with the US PPI
data and the University of Michigan Consumer Sentiment survey.