USD/CAD tentatively recaptured the 1.40 handle for a second time in over the past month after softer Canadian data and weak oil prices triggered loonie weakness. Both Canada’s November industrial production contracted -0.2%, worse than the expected 0.1% gain and the raw materials index fell -4.0%, weaker than the eyed -2.0 forecast.
The USD/CAD daily chart displays the bullish trend that is facing major resistance from the 1.40 handle. Price is also tentatively invalidating the bearish ABCD pattern that formed last month. Point C was confirmed just ahead of the 50.0% Fibonacci retracement of the A to B leg, while Point D was targeted with the 161.8% Fibonacci expansion level of the B to C move.
If the bullish move continues above the noted resistance level, we will see fresh 13-year highs. If we see a daily close above the 1.4165 level, price may target the 1.45 handle.
If we see the psychological 1.40 level respected, a bearish pullback may target the 50-day SMA, which currently trades around the 1.35 zone.
The trade: Buy USD/CAD at 1.3950 with a stop loss at 1.3900 and take profit at 1.4150. The risk/reward ratio is 1:4