USDCAD Technical Analysis – We are back at the key support zone

Fundamental
Overview

The USD got a boost last
week from the strong US PMIs which lifted Treasury yields and put in
question the rate cut in September. Once the market digested the report though and
saw that there was more good news on the growth side than bad news on
inflation, the USD strength faded as the risk-on sentiment ensued.

The CAD, on the other hand,
got pressured from the weaker than expected Canadian CPI figures
which raised the chances of a rate cut in June (although it remains basically a
coinflip). The risk-on sentiment though is supportive for commodity currencies
like the CAD, so if it this were to continue, we could see even more gains
ahead.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD sold off all the way back to the key support
zone around the 1.36 handle where we can also find the confluence
of the trendline
and the 61.8% Fibonacci
retracement level.

This is where the buyers
keep stepping in with a defined risk below the support to position for a rally
into the 1.39 handle. The sellers will need to see the price breaking below the
support to gain more conviction and increase the bearish bets into the 1.34
handle.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we got a fakeout last week above the downward trendline after the
strong US PMIs data. The market faded the USD strength the following day as the
positive risk sentiment supported the CAD.

From a risk management
perspective, the sellers will have a better risk to reward setup around the
38.2% Fibonacci retracement level where they can target the break below the
support with a defined risk above the downward trendline. The buyers, on the
other hand, will want to see the price breaking the downward trendline again to
increase the bullish bets into the 1.39 handle.

USDCAD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have the upper limit of the average
daily range near the 38.2% Fibonacci retracement level and the swing high
at 1.3671. That zone is going to be a resistance now with a break above it
giving the buyers more control.

Upcoming
Catalysts

Today we get the Canadian PPI and the US Consumer
Confidence report where the focus will likely be on the labour market details.
On Thursday, we will see the latest US Jobless Claims figures. Finally on
Friday, we conclude the week with the Canadian GDP and the US PCE reports.