USDCAD Needs to Break Critical Support As 1.3000 Beckons

Summary:

The USDCAD is targeting the mid-January lows as the loonie holds the upper hand over the greenback even after the FOMC's inflation target adjustment.

A very choppy day on many USD pairs, including the USD/CAD, is starting to show signs of stability, with the loonie about to close off a milestone on the greenback. The USDCAD is trading at 1.31396 and is set to post its lowest close since mid-January.

The announcement of a revised inflation targeting protocol by FOMC Chairman Jerome Powell triggered a choppy round of trading. The BoC Chief Macklem was also a speaker at the same event in which Powell delivered the new inflation-targeting mandate for the FOMC. Macklem, however, did not provide any market-moving commentary. However, the loonie continues to seem favoured over the greenback, as WTI crude has trended slightly upwards over the last three months.

Technical Outlook for USDCAD

The pair is challenging the 1.31501 support at current price levels. Today’s candle only needs to close below this level to provide breakdown confirmation of this support, as yesterday already delivered the first lower close. This breakdown would open the door for another move south towards the 1.30385 support (29 October 2019 and the cluster of January 2020 lows), with 1.29953 and 1.28951 lining up as potential future support candidates.

The reverse scenario would have to come from a bounce on 1.31501, which allows the pair to target 1.33487. Supporting such a move would be a failure of the daily candle to close below the 1.31501 support, and also the fact that the current price levels are at the price objective that matches the measured move from the triangle’s breakdown. Additional actions towards the north may also target 1.34656, with 1.35499 and 1.36961 gearing up as potential distant targets.