USD/CAD Consolidation Continues with BoC Rate Decision and US Data in Focus

Market Consolidation After Early 2024 Surge: The USD/CAD currency pair has had a dynamic journey in 2024. After climbing from a low of $1.3170 in January to near $1.38 in April, representing a solid 5% increase, the market has entered a period of consolidation.

Recent Price Action: For the past six weeks, the pair has been trading sideways in a range between $1.36 and $1.38. This sideways movement could be interpreted as a continuation of the long-term uptrend, with bulls gathering strength before the next leg up. The market has established a short-term bottom after retesting $1.36 this week, with bullish momentum building ahead of significant economic announcements.

Upcoming Economic Events: This week presents a critical juncture for the USD/CAD pair, with two key events poised to significantly impact the exchange rate: the Bank of Canada’s (BoC) interest rate decision later today and the release of US Nonfarm Payrolls data on Friday. The events will significantly impact the value of both currencies, ultimately influencing the exchange rate.

Short term Pivot Points: The $1.3650 pivot has been established as a short-term bottom since yesterday, defending the current ongoing bullish wave, with momentum expected to continue while above this level. The first resistance test is identified at yesterday’s high of $1.37, representing the first challenge for bullish momentum and the current target area while the short-term bullish momentum is maintained.

Key Support Levels: The key support level for the range is outlined at $1.36, which has held firm throughout the recent consolidation phase, the pair could revisit this level for a retest, even in a bullish scenario. Bullish rejection patterns following a retest of the $1.36 level can attract new buyers and further fuel the uptrend. Conversely, a break below the lower boundaries of $1.3580, can signal a shift to a bearish outlook. This could potentially reverse the long-term uptrend and lead to further declines in the USD/CAD exchange rate.

Key Resistance Levels: The $1.3750 level represents immediate resistance, having been rejected twice during the past two weeks. A decisive break above this level would be seen as a test of strength for the bulls and could signal a potential move towards the upper boundary of the range. Breaking through $1.38 would be a significant technical development, potentially indicating a continuation of the long-term uptrend, especially if news and economic data favour the USD.

Potential for Breakout: The potential divergence in central bank policies, with a possible rate cut by the BoC and a likely hold by the Fed, could lead to a strengthening of the USD relative to the CAD. The outcome of this week’s events, along with key technical levels, will be critical in determining the future course of the USD/CAD exchange rate. A breakout from the current consolidation phase could be imminent, and the direction of the breakout will depend on how the USD and CAD react to this week’s news announcements.

USDCAD 1 Hour Chart

USDCAD Daily Chart

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