USD/CAD breaks above long-term downtrend resistance on poor Canadian retail sales

Canadian consumer did not go on a shopping spree around Christmas. The volume of retail sales dropped by 0.8% in the last month of 2017, far worse than a rise of 0.2% that was projected. The figure for November was revised higher from +0.2% to +0.3%, but this does not provide any kind of silver lining.

Core retail sales fell by no less than 1.8%, much lower than the rise of 0.3% that was forecast. The meager upwards revision did not compensate here either.

Market Impact tool trading opportunity

The reaction in USD/CAD was swift. The pair traded just under C$1.2700 before the publication and jumped quickly to around $1.2750. The response closely followed the one that was predicted in the Market Impact tool as previewed here.

Here is the prediction as it appears on the economic calendar, providing the trade opportunity and forecasting the magnitude of the move:

USD/CAD technical analysis: downtrend resistance and 200-day SMA broken

As the chart below shows, the pair made a decisive break above the long-term downtrend resistance line. The line began at the peak back in May 2017, when the USD/CAD traded above $1.3700. It was then formed in late 2017 at $1.2920. The unequivocal move above $1.2700, to $1.2750 and beyond, opens the door to another attempt at the $1.2920 level. 

In the last encounter with the $1.2920 line, the pair was also rejected by the 200-day Simple Moving Average. The current break to the upside also challenges the 200-day SMA. A confirmation of the break would reinforce the bullish bias.

The RSI is significantly above 50 but not at oversold territory just yet. Momentum is strong. Both gauges point to further gains.

Above $1.2920, the round $1.3000 level and $1.3180 are both notable. Support is awaiting at $1.2610 and $1.2450.