USDCAD Technical Analysis: Trading within a Narrow Range
Late Thursday afternoon, the Wall Street Journal’s Timiraos published an article hinting at the possibility of a 50 bps cut still being discussed by the Federal Reserve. This news caused the market to increase the probabilities of a 50 bps cut to around 40%, up from the previous 13%. Nick Timiraos, considered a Fed “insider”, holds significant influence over market sentiment regarding potential Fed decisions. As a result, the probability of a 50 bps cut at the upcoming meeting now stands at 60%, with a total of 118 bps of easing expected by year-end. This repricing led to a weakening of the US Dollar against other major currencies as Treasury yields declined further.
After the Federal Reserve’s decision, market focus will shift back to economic data. If better-than-expected figures are released, the market may begin to reduce expectations of aggressive easing in 2025, potentially supporting the greenback in the short term. On the other hand, if economic data continues to disappoint, the US Dollar could face further downward pressure.
As for the Bank of Canada (BoC), the market anticipates a 25% probability of a 50 bps cut at the upcoming meeting, with a total of 68 bps of easing expected by year-end. Governor Macklem recently suggested the possibility of larger rate cuts if growth and inflation fall below expectations. This cautious outlook from the BoC has contributed to the market’s expectations of monetary policy easing in the near future.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, the USDCAD pair is currently testing a key resistance level around the 1.36 handle. Sellers have been stepping in at this level, with a defined risk above the resistance level for a potential drop back towards the 1.34 handle. Buyers, on the other hand, will be looking for a breakout above the resistance level to target the 1.38 handle next. The daily chart provides a clear picture of the price action and key levels to watch for potential trading opportunities.
USDCAD Technical Analysis – 4 hour Timeframe
Moving to the 4-hour chart, we can see that the USDCAD pair is trading within a tight range between the 1.3560 support and the 1.36 resistance. Buyers will be waiting for a breakout above the resistance level to increase bullish momentum towards new highs, while sellers will be eyeing a breakdown below the support level for a potential drop towards the 1.34 handle. The 4-hour chart offers a more detailed view of the current price range and potential trading scenarios.
USDCAD Technical Analysis – 1 hour Timeframe
Zooming in on the 1-hour chart, we can observe the tight range and choppy price action of the USDCAD pair. Market participants are likely waiting for a breakout on either side of the range to establish their trading positions. The red lines on the chart indicate the average daily range for the day, providing a visual reference for potential price movements. The 1-hour chart offers a more granular view of the current price action and short-term trading opportunities.
Upcoming Catalysts
In the coming days, several key economic indicators are scheduled for release that could impact the USDCAD pair. Tomorrow, we have the Canadian Consumer Price Index (CPI), US Retail Sales, and US Industrial Production data. On Wednesday, the Federal Open Market Committee (FOMC) Rate Decision will be closely watched by market participants for any hints on future monetary policy. Thursday brings the latest US Jobless Claims figures, providing insights into the labor market’s health. Finally, on Friday, the Canadian Retail Sales data will be released, offering further clues about consumer spending trends.
Overall, the USDCAD pair remains within a narrow trading range, with market participants awaiting key economic data releases and central bank decisions for further guidance on future price movements. Traders should closely monitor the technical levels highlighted in the analysis to identify potential trading opportunities in the USDCAD pair.
