USDCAD broke below its descending triangle support visible on the 4-hour chart, indicating that a selloff of the same height as the pattern is due. Price is consolidating, though, so a pullback to the broken support might take place first.
Applying the Fib tool shows that the 38.2% level lines up with the former support around the 1.3500 major psychological mark. A larger correction could last until the 50% Fib at 1.3512 or the 61.8% level at 1.3533. If any of these hold as resistance, USDCAD could resume the drop to the swing low or lower.
Price also seems to be in a bearish flag formation, which is indicative of trend continuation. A move below the support at 1.3425 could be followed by a drop of the same height as the mast, which spans 1.3425 to 1.3600.
The 100 SMA is crossing below the 200 SMA to indicate that the path of least resistance is to the downside or that support is more likely to break than to hold. However, RSI is indicating oversold conditions or exhaustion among sellers and a possible return in bullish pressure. Stochastic is also pulling up from the oversold region to suggest a pickup in bullish momentum.
Economic data from Canada turned out weaker than expected yet the Loonie was still able to rally as risk-on flows have been in play. Traders also seem to be anticipating upbeat results from the EIA report, which could reflect another draw in crude oil stockpiles.
Canada’s core retail sales rebounded by 10.6% in May, slower than the expected 11.9% gain, but the earlier figure was revised to show a smaller 20.7% drop. The headline figure also enjoyed a positive revision for the April reading but the May report turned out below consensus with an 18.7% increase.
Canada’s inflation reports are due next, with the headline CPI projected to climb from 0.3% to 0.4%. There are no major reports due from the US economy.
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