USDCAD Technical Analysis – Watch what happens around this key support

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, which should give the BoC
  a reason to wait for more data before considering rate cuts.
• On the labour market side, the latest report missed
  expectations although wage growth spiked to the highest level since 2021.
• 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 bounced
on the 50% Fibonacci retracement level
and rallied all the way up to the recent high following the strong US NFP
report. The sellers stepped in around the high with a defined risk above it to
position for a drop into new lows. The buyers, on the other hand, will want to
see the price breaking higher to increase the bullish bets into the next resistance at
1.3620.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair is
now at a key support zone around the 1.3450 level where we can also find the confluence with the
50% Fibonacci retracement level and the daily 21 moving average. This is
where the buyers are likely to step in with a defined risk below the support to
position for a rally into the 1.3540 resistance targeting a break above it. The
sellers, on the other hand, will want to see the price breaking lower to
invalidate the bullish setup and increase the bearish bets into the 1.3360
level.

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 support zone. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. In this case, we got a pullback into
the 1.3493 level where the sellers stepped in and pushed the pair back into the
support. We now have this range between the 1.3450 support and 1.3493
resistance. A break on either side should be followed by a sustained move in
the direction of the breakout.

Upcoming Events

Today the only notable event on the agenda is the
Canadian labour market report where the market will focus especially on wage
growth since the BoC placed a great emphasis on it.