USDCAD Technical Analysis – Key levels in play

USD

• The Fed left interest rates unchanged as
  expected at the last meeting and dropped the tightening bias in the statement.
• The US PCE came
  in line with expectations.
• The US Jobless Claims missed
  expectations although the data is still in the recent ranges.
• The latest US PMIs
  increased further from the prior month with the Manufacturing PMI beating
  expectations and the Services PMI missing.
• The US Consumer
  Confidence missed expectations across the board.
• The market expects the first rate cut in June.

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 missed expectations across the
  board with the underlying inflation measures falling, which will be a welcome
  development for the BoC.
• 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 first rate
  cut in June.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD eventually
bounced around the key trendline and
extended the rally into the 1.36 handle. We are now trading around the swing
level at 1.3619 and this is where we can expect the sellers to step in with a
defined risk above the level to position for a drop into the lows. The buyers,
on the other hand, will want to see the price breaking higher to invalidate the
bearish setup and increase the bullish bets into the 1.3862 level.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely how
the price bounced around the trendline and rallied all the way up to the 1.36
handle. The price yesterday pulled back to retest the 1.3541 resistance turned support and
continued higher as new buyers stepped in with a defined risk below the trendline.
The sellers will need the price to break below the trendline to turn the trend
around and increase the bearish bets into the lows.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
recent price action might have formed a bullish flag. The
buyers will need the price to break the top trendline to confirm the pattern
and position for a break above the 1.3619 level. The sellers, on the other
hand, will want to see the price reversing and breaking below the major upward
trendline to invalidate the bullish setup and position for a drop into the
lows.

Upcoming Events

Today the only notable event will be the release of
the US ISM Manufacturing PMI.