TECHNICAL ANALYSIS
On the daily, USDCAD pair has nearly reversed the gains it made following the release of the US CPI data. This reversal occurred as BoC Governor Macklem delivered a hawkish speech, suggesting that the central bank might consider another rate hike if underlying inflation data continues to outperform expectations. The divergence between the recent upward movement and the MACD indicator implies a potential correction towards the trendline, located around the 1.35 level. On the 4-hour chart, we can observe that the pair reached the 61.8% Fibonacci retracement level after the US CPI release but has since started to gradually give back those gains. This retracement is likely due to the market positioning itself for a potentially surprising Bank of Canada rate decision next week, contingent on today's CPI data surpassing forecasts. The support area near 1.3620 is pivotal for determining the next price direction. A strong rebound from this level could attract more buyers, setting the stage for an upward move into new highs. Conversely, a breakdown below this support may prompt sellers to enter the market more aggressively, potentially extending the decline towards the trendline near the 1.35 level. Switching to the 1-hour chart, we can see a recent minor bounce that was ultimately rejected at the prior support, which has now turned into resistance at approximately 1.3635. However, it's worth noting that the price broke above a counter-trendline, and the moving averages have crossed over, indicating the potential dominance of bullish momentum. To confirm this bullish scenario, buyers will need to breach the 1.3635 level. On the other hand, if the price falls back below the counter-trendline and breaks beneath the support, it would negate the bullish setup and likely lead to increased selling pressure.
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