USDCAD Technical Analysis – The hot Canadian CPI trims rate cuts bets

Fundamental
Overview

The USD continues to be backed
by good economic data as we have also seen recently from the US PMIs last Friday and the US Consumer Confidence report yesterday. Although such
data keeps the interest rates expectations stable around two cuts by the end of
the year, it also supports the risk sentiment amid a pickup in growth. This
could be a headwind for the greenback.

The CAD, in fact, has been gaining
ground against the greenback probably due to the better risk picture. Yesterday,
we got the Canadian
CPI figures which surprised to the upside and trimmed rate cuts
expectations for July with the market now pricing a 60% chance of no change.

That was not enough to
break out of the strong support zone around the 1.36 handle as it doesn’t change
much the big picture, but it might keep the Loonie supported amid the positive
risk sentiment.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD bounced on the key support zone around the 1.36 handle. That’s where the
buyers continue to step in with a defined risk below the support to position
for a rally back into the 1.3785 resistance. The sellers will want to see the
price breaking lower to pile in more aggressively and target a drop into the
1.34 handle next.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the pair has been ranging between the 1.36 support and the 1.3785
resistance for several months as the market doesn’t have a strong reason to
sustain a trend on either side yet.

The sellers are stepping
back in around the 1.3680 level with a defined risk above it to position for a
break below the key support zone with a better risk to reward setup. The buyers,
on the other hand, will want to see the price breaking higher to shift the bias
and increase the bullish bets into the 1.3785 resistance.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a downward trendline and the 61.8% Fibonacci
retracement level adding some extra resistance to the 1.3680 level. This is
the area where the sellers will keep on piling in from to position for a drop,
while the buyers will want to see it failing to gain more conviction for an
extension to the upside. The red lines define the average daily range for today.

Upcoming
Catalysts

Tomorrow we get the latest US Jobless Claims figures, while on Friday we
conclude the week with the Canadian GDP and the US PCE report.