USDCAD Technical Analysis – Is this only a pullback or a reversal?

Fundamental
Overview

The US Dollar is now lower
across the board as the market erased most of the greenback’s gains following
Trump’s victory. This has been a puzzling reaction as Trump’s policies are
likely to spur growth and potentially end the Fed’s easing cycle earlier than
expected.

We can argue that the
market was already positioned for a Trump’s victory as we saw the greenback
rallying for a couple of weeks leading into the US election. So, this might
just be a “sell the fact” reaction and the market might now need more to keep
bidding the USD.

Another possible
explanation is that the market is more focused on global growth now and that’s
generally bearish for the greenback. We saw something similar in 2016 when the
USD rallied strongly once Trump got elected but after a couple of months, it went
into a 2-year long downtrend.

The Fed for now remains
neutral and on track to keep cutting rates. Yesterday, they cut by 25 bps as expected and given the overall neutral
message, the market expects another 25 bps cut in December. Strong data from
now until the December meeting though could change their plans for 2025.

We have the US CPI report
next week and that’s going to be a test. If the US Dollar sells off on hot
data, then the market might be indeed focusing on global growth rather than the
potential for an earlier pause in the Fed’s easing cycle.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD rejected once again the 2-year highs amid some USD weakness.
The buyers will want to see the price breaking above the high to increase the
bullish bets into new highs, while the sellers will look for a break below the recent
low around the 1.3825 level to pile in more aggressively for a drop into the
1.36 handle.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a strong support
zone around the 1.3825 level where the price got rejected from several times in
the past weeks. We may now have a range between the 1.3825 level and the 1.3950
level. The market participants will continue to play the range until we get a
breakout on either side.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much else we can add here as the rangebound price action makes all the
technical levels between the main support and resistance pretty weak. The red
lines define the average daily range for today.

Upcoming
Catalysts

Today, we conclude the week with the Canadian Labour Market data and the US University
of Michigan Consumer Sentiment report.