The loonie was modestly weaker early in NY after a surprise miss on Canadian retail sales and despite a solid advance with consumer prices. The economy remains stagnant and inflation may be kept down if energy prices remain weak. The market reaction saw USD/CAD rally from 1.2265 to key resistance at 1.2294.
Statistics Canada reported a .01% drop with April retail sales, much lower than forecasted 0.5% gain. Canada’s CPI reading came in at 0.9%, a little higher than the forecasted 0.8% pace.
The USD/CAD 60-minute chart above shows that price is tentatively respecting key support from a bullish ABCD pattern that formed with yesterday’s low of 1.2126. Point D of the bullish pattern is targeted with the 141.4% Fibonacci expansion level of the B to C leg.
The 2015 trend has been fairly bullish with the currency pair over 5% higher. If bullish momentum returns, we could see USD/CAD target the 1.2800 region again. To the downside key support will come from the 1.2000 zone.
The trade: Buy USD/CAD at 1.2275, with a stop loss at 1.2175, and a take profit at 1.2575. The Risk/Reward Ratio is close to 1:3.
Edward J. Moya
WorldWideMarkets Online Trading