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Sr. Technical Strategist
The U.S. dollar has regained its footing against the Canadian dollar as markets price a near-certain Federal Reserve rate hike and an 88% chance of a second. Pitchfork analysis shows USD/CAD breaking above its median line and rallying into a dense cluster of Fibonacci resistance, which leaves the broader uptrend intact but stretched. The structure matters because it defines both the support a rally needs to hold, and the breakout required to resume the larger trend. That makes the pitchfork a practical map of where the USD/CAD trend is confirmed and where it would be challenged.
Michael Boutros, StoneX Media Senior Market Analyst at StoneX, covers currencies, commodities and equity indices across multiple time frames, with a focus on the macro events that move them. That coverage gives insight into what is driving USD/CAD, from Fibonacci confluence and pitchfork structure to Federal Reserve rate expectations.
"Anything below the median line of that pitchfork would open up the potential for a much larger washout," Boutros says of the structure drawn from three USD/CAD swing points, a major low, the swing high that followed and the subsequent low. The pitchfork median line acts as the dividing line for the USD/CAD uptrend, and the pair broke above it on a breakout of its weekly opening range before rallying into resistance. Specifically, initial support below the market sits at the June highs and the October opening range, a former pivot that triggered the prior slide once it broke. As a result, a USD/CAD pullback that holds above the median line keeps the near-term slope in play, whereas a move beneath it shifts the focus to deeper support and a larger washout.
Resumption of the larger USD/CAD uptrend requires a breach above the 61.8% retracement of the prior major decline, which converges on the 75% parallel of the pitchfork. Without that breakout, the USD/CAD rally presses into a pivot zone where an 88.6% retracement and a key weekly closing high line up, and Boutros notes that "while we are still in a very strong uptrend, that advance may be a bit vulnerable heading into this pivot zone". The near-term test sits beneath the market, where USD/CAD needs "that support structure to hold" for the advance to continue. Conversely, a break below the most recent weekly low, which converges on the 38.2% retracement of the prior decline, would nullify the USD/CAD advance and hand control back to sellers. Consequently, the pitchfork frames the USD/CAD uptrend as conditional, confirmed by a breakout above confluence and challenged by a drop through its lower anchors.
Federal Reserve rate expectations are the clearest macro signal behind the USD/CAD pitchfork, evidenced by market pricing for further hikes that has put fuel and support under the U.S. dollar. The U.S. producer price index, including core PPI, stands out as a marquee data release for the U.S. dollar alongside those rate expectations. Initial jobless claims and comments from Federal Reserve officials add context on the labor market and the policy path. Any shift in that rate pricing raises the potential for a larger USD/CAD pullback, which is why these releases sit alongside the median line as markers of the trend.
--- Written by Mohamed Faisal, StoneX Media Editor
--- Expert: Michael Boutros, StoneX Media Senior Market Analyst
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