USDCAD has been on a short-term uptrend, as shown by the ascending forex support trend line connecting the pair’s recent lows. Price looks ready to make a test of the trend line for now and may bounce off forex support, as this lines up with the 38.2% Fibonacci retracement level.
Stochastic is moving out of the oversold area, indicating that buyers are about to take control of price action. If the pair resumes its climb, it could move up to the resistance around the previous highs at 1.1670. Stronger buying pressure could even lead to a break past those levels and a move towards the 1.1700 major psychological mark.
Forex Support Bounce
A deeper retracement could still be possible, as there are forex support zones located at the 50% to 61.8% Fib levels. These line up with the 1.1550 minor psychological mark and 1.1500 major psychological level respectively, both of which could have a lot of buy orders located.
Event risks for this forex support trade today include the release of Canadian retail sales and CPI. Headline CPI is expected to show a 0.2% decline, mostly due to falling oil prices, while core CPI might print at 0.1% uptick. Headline retail sales could see a 0.4% drop while core retail sales could indicate a 0.2% rise.
Stronger than expected data could lead to more Loonie rallies, which might be enough to trigger a downside break of the rising trend line support. Bear in mind though that there are no economic reports from the US, suggesting that the safe-haven dollar might react mostly to risk sentiment.
For now, demand for the Greenback is strong as the Fed showed a bit of inclination for considering tightening monetary policy next year. While their recent FOMC statement indicated that they’re still keeping rates low for a considerable time, they also mentioned that they’re being patient in looking into rate hikes.
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