This week, Federal Reserve System took a slightly more hawkish stance than expected. They decided to keep interest rates unchanged in the range of 5.00-5.25%, but raised the projected terminal rate in the Dot Plot by 50 basis points. The FOMC decided to pause this meeting to gather more economic data before making a decision on a potential rate hike in July. Due to the weaker details, they have been cautious lately NFP message, ISM Services PMI message a CPI news, although core inflation figures remained at high levels.

Fed Chairman Powell mentioned that the July meeting is “alive” but did not want to commit ahead of time. The market quickly bid up the US dollar when the Dot Plot was released, but returned to its original levels once Powell’s press conference began. Overall, this suggests that the Federal Reserve is ready to take further measures to reduce inflation, but their decisions will depend on economic data. Yesterday the US count Unemployment claims again significantly missed expectations, which could be another indication of a weakening labor market.

USDCAD Technical Analysis – Daily Time Frame

On the daily chart, we can see that USDCAD finally reached the key support level of 1.3225. Here we should find strong buyers defending the level with defined risk below it and 1.38 as a target. That would be a play with the expectation that we will still see a range and therefore continue to buy at support and sell at resistance. Sellers will try to push the price below the level and squeeze the buyers, or extend the sale to at least 1.30. Drag from blue 8 moving average although it does suggest that we may see a pullback first before another possible attempt to break below.

USDCAD Technical Analysis – 4 Hour Time Frame

On the 4 hour chart we can see that we have a divergence with
MACD straight to the key support level of 1.3225. This is generally a sign of fading momentum, often followed by pullbacks or reversals. In this case, we can get back down trend line and the previous resistance level where sellers should pile in for further downward pressure.

USDCAD Technical Analysis – 1 Hour Time Frame

On the 1-hour chart, we can see that from a risk management perspective, sellers would be better off leaning against the 1.33 resistance as it is converging with psychological round number61.8% Fibonacci retracement level, trend line and daily 8 moving average. With such strong resistance, sellers would have a much higher risk of rewarding setups. On the flip side, buyers can lean on this 1.3225 support to first target the 1.33 level and then a break of the trend line to extend the rally towards the 1.34 resistance.

Today, the market will pay attention to the University of Michigan consumer sentiment report. Most recently, the market reacted strongly to this news as long-term inflation expectations showed a significant increase, from 3.0% to 3.2%. However, this figure was later adjusted to 3.1%. So if we see a further rise in long-term inflation expectations, the US dollar is likely to go higher. On the other hand, if the data does not match the forecasts, we may see the value of the dollar falling.