CAD Rally Looks to CPI, Retail Sales for Fuel
Technical Outlook: USDCAD broke channel support earlier this week with a break below the weekly opening-range low at 1.3134 shifting the near-term focus lower in the pair. We’re seeing a slight rebound off the 50% retracement here at the 1.30-handle but heading into Canada Retail Sales & the Consumer Price Index (CPI) releases, the focus remains lower while below 1.3134/48.
A break lower targets subsequent support targets at 1.2949 & the September low-day close / channel support at 1.2870/84-an area of interest for possible exhaustion / long-entries. Look for interim resistance at 1.3064 backed by the monthly open at 1.3104 & 1.3134/48. A breach close above basic trendline resistance extending off last week’s high would be needed to put the broader long-bias back in control.
From a trading standpoint, the immediate risk remains lower into tomorrow’s event risk but ultimately I would be looking to fade weakness into structural support. Keep in mind this is the first time the core rate of inflation is expected to slow since May, a potential bearish development for CAD (bullish USDCAD). For the complete setup and to continue tracking this trade & more throughout the week- Subscribe to SB Trade Desk.
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- A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net shortUSDCAD- the ratio stands at -1.13 (47% of traders are long)- weak bullish reading
- Long positions are 22.0% higher than yesterday and 45.8% above levels seen last week.
- Short positions are 21.9% lower than yesterday and 16.1% below levels seen last week.
- Open interest is 6.0% lower than yesterday and 0.2% above its monthly average.
- Note that although the SSI ratio remains in negative territory, the recent build in long positioning suggests that a broader shift in sentiment may be underway. As such, the recent dynamic suggests that the risk remains lower for now as retail traders attempt to fade the recent loonie strength.
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Relevant Data Releases This Week
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---Written by Michael Boutros, Currency Strategist with DailyFX
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.