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Today’s Trading Edge: USD/CAD rises to key resistance on weak Canadian Retail Sales



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

Technical Strategist

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