USDCAD: Bulls Targeting 1.1060 As Upside Targets Start To Open Up

Market Sentiment - Bullish

Canadian dollar weakened against the U.S. dollar after the release of advance estimates of U.S. retail and food services sales for March. USDCAD after forming a base at 1.0856 has managed to climb back towards a major trendline connecting all previous swing highs. A break and close above the trendline resistance zone might take the pair higher towards the 1.1060 confluence zone.

The most significant point to note is that the market sentiment is mostly in favor of more weakness in the Canadian dollar. The only thing which might worry the USDCAD buyers is the divergence formed on RSI. Yesterday’s stronger than expected U.S. retail sales report was overwhelmingly positive for the greenback, as USDCAD pair climbed towards the 100-day simple moving average. 



Technical Analysis

USDCAD buyers have managed to pierce an important resistance level at 1.0940, and even traded above 23.6% Fibonacci retracement level of the recent move from 1.1277 high to 1.0858 low. However, the dollar sellers are putting up a fight around a major descending trend line, which also coincides with 100-day simple moving average. A break above the trendline might encourage a move towards the 1.1060 level. This particular level holds a lot of importance, as it is a double confluence area of 200 SMA on the 4 hour timeframe and 50% Fibonacci retracement level. 

Alternatively, a reversal downward from trendline resistance aims for the previous support at 1.0940, followed by a test of 1.0860 low.

US Retail Sales Report



During yesterday’s New York session, the U.S. Census Bureau announced the advance estimates of U.S. retail and food services sales for March. The report suggested that there was an increase of 1.1 percent (±0.5%) from the previous month, and 3.8 percent (±0.7%) above March 2013. The January 2014 to February 2014 percent change was revised from +0.3 percent to +0.7 percent. This was definitely encouraging because as long as the U.S. economy recovers at a stable pace, the Federal Reserve will continue to taper and bring down asset purchases to nothing by the end of the year. 

The Focus now shifts to the U.S. inflation report, which will be published later today. Overall, if the economic data continue to impress the investors, then a break higher is feasible in the USDCAD pair.