USDCAD Technical Analysis – This breakout might be a bad omen for the bulls

USD

• The Fed left interest rates unchanged as
  expected at the last meeting with basically no change to the statement.
• Fed Chair Powell stressed
  once again that they are proceeding carefully as the full effects of policy
  tightening have yet to be felt.
• The recent US CPI missed
  expectations across the board bringing the expectations for rate cuts
  forward.
• The labour market is
  starting to show weakness as Continuing Claims are now
  rising at a fast pace and the recent NFP report
  missed across the board. Last week though, the US Jobless Claims beat
  forecasts by a big margin, although volatility in the data is normal.
• The latest US PMIs came
  basically in line with expectations with a miss in the Manufacturing index and
  a beat in the Services measure.
• The recent Fedspeak has been leaning on
  the hawkish side, but the recent data suggest that the Fed is likely done for
  the cycle.
• The market doesn’t
  expect the Fed to hike anymore.

CAD

• The BoC left interest rates at 5.00% as expected at the last meeting but
  remains prepared to raise rates further if needed.
• BoC Governor Macklem delivered a less hawkish speech in
  the press conference compared to his previous remarks.
• The recent Canadian CPI missed expectations across the
  board and the underlying inflation measures eased, which was a welcome
  development for the BoC.
• On the labour market side, the latest report missed expectations
  across the board with negative figures in full-time employment and slowing wage
  growth, which is going to be another positive outcome for the central bank.
• The market doesn’t expect the BoC to
  hike anymore.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD broke
below the key trendline and
extended the drop into the 1.36 handle. From a risk management perspective, the
buyers would be better off waiting for a pullback as the price looks a bit
overstretched as depicted by the distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
break below the trendline last Friday and the retest yesterday before another
drop. The support zone
around the 1.3650 level will now be a key resistance as a break to the upside
might lead to a reversal back into the downward trendline around the 1.3750
level.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is bouncing around the recent low at 1.3594. The sellers are likely to
lean on the downward trendline with a defined risk above it to target the 1.34
handle. The buyers, on the other hand, will want to see the price breaking
higher to invalidate the bearish setup and position for a rally into the 1.3750
level.

Upcoming Events

Today, we will get the latest US Consumer Confidence
report and it will be interesting to see how the US consumers see the labour
market. On Thursday, we will see the US PCE and US Jobless Claims data with the
market likely focusing more on the latter given that we already saw the latest
inflation data with the US CPI report just two weeks ago. Finally, on Friday,
we conclude the week with the Canadian Labour Market report and the Manufacturing
PMI, followed later by the US ISM Manufacturing PMI which missed expectations
by a big margin the last time.