USD/CAD Signals Bullish Continuation After Poor Canadian Data

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USD/CAD Signals Bullish Continuation After Poor Canadian Data

THe USD/CAD was bearish last week falling from just under 1.11. Even after the FOMC bump for the greenback, the pair made a new low at 1.0885. At that point, the 1H USD/CAD chart showed a possible bearish outlook with price falling below the 200-, 100-, and 50-hour simple moving averages (SMAs). However, after rebounding from 1.0885, price rallied above last week’s falling trendline, and above the SMAs.

USD/CAD 1H Chart 9/23
usdcad 1h chart 9/23

(click to enlarge)

We got a dip from 1.1048 during the early part of the 9/23 session, but as we got in the US session, price stalled around 1.0990. After the poor Canadian Retail sales data (refer to data at the bottom of the article), USD/CAD rallied. Note that the 1H RSI held above 40, and that price is holding above the cluster of SMAs. This rally is a bullish slingshot signal and reflects maintenance of the bullish momentum this week.

A break above 1.1050 should first open up the 1.1095-1.11 area. Above 1.11, the 1.1278 high on the year will be in sight. The daily chart shows that this week’s rally reaffirm the bullish outlook with price bouncing off the cluster of daily SMAs.

USD/CAD Daily Chart 9/23
usdcad daily chart 9/23

(click to enlarge)

CAN Retail Sales m/m (July): -0.1%
Forecast: 0.4%
Previous 1.2%

Core CAN Retail Sales m/m (July): -0.6%
Forecast: -0.1%
Previous: 1.5%

CAN Retail Sales 9/23

 

(source: Statcan)

The underlying trend is still going up as we can see in the historic chart going back to 2009. However, July’s readings showed decline in demand for the first time in 2014 for both the headline and core reading.

Sales dipped on 5 out of the 11 sub-sectors, lead by a 2.7% dip in sales at generalized merchandised stores. Auto and parts sales rose 1.6% in July. When you take this component out, you can see that the core reading was much worse than the headline print.

This data add some weight on the CAD which has been bearish at least vs. the USD since early July.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.