USD/CAD Relinquishes 1.09, More Losses Ahead
Technical Sentiment: Short-term Bearish
Key Takeaways
- Canadian New Housing Price Index up next (slightly bullish expectation);
- USD weak ahead of Unemployment Claims (consensus at 307k) and Import Prices;
- USD/CAD broke range pattern, indicating more losses ahead.
Traders finished digesting yesterday’s disappointing Core Retail Sales (0.1%) and Retail Sales (0.0%) reports, triggering a small scale sell-off below USD/CAD support level at 1.0904. Unless today’s reports boost the USD yet again, the pair is expected to test 1.0820.
Technical Analysis
Following the massive USD rally that ruled the markets throughout July, USD/CAD slowed down to a halt in August which resulted in a perfect range pattern between 1.0903 and 1.0983. The pair is currently trading just below 1.0900, having broken below the support without too much volatility. This signals short term bearish pressure is mounting and a correction lower is extremely likely.
Immediate support is identified at 1.0860/68, where the 100-Day Simple Moving Average and 200-Day Simple Moving Average almost converge. 1.0820 is the secondary target, a very strong price pivot zone dating back to May and June this year. Stochastic is also signaling a correction with a steady decline from overbought territory.
It’s important to underline that USD/CAD remains bullish in the long term. On the Daily time frame, its swing configuration is very bullish, with the top formed in August exceeding the previous Lower High from 5th May 2014. Consequently, traders should treat the major support levels with extreme caution and keep an eye out for bullish price action signals that might indicate the return of the main uptrend.
