The USDCAD extended drop by -0.20% ahead of US Retail sales data for October on Wednesday. The dollar was downbeat after a miss in US PPI data which dropped to 0.2% against the 0.4% expected on Tuesday afternoon. The Canadian dollar remains steady ahead of Canadian Consumer Inflation figures due later in the New York session.
A recovery in oil prices helped lift Canadian dollar sentiment against the US dollar after the outbreak of some geopolitical tension caused by a Russian missile that killed 2 people in Poland. The chances of further supply disruption could boost the Canadian dollar amid rising demand. The significant drop in US oil reserves released by the American Petroleum Institute data continues to underpin Canadian dollar strength.
However, traders will be closely watching the Canadian CPI data along with the US monthly Retail Sales for fresh trade opportunities. Crude oil inventories will be key in gauging oil market demand in the near-term and oil price dynamics could produce short-term trading opportunities for USDCAD traders.
Weekly Chart Analysis
The USDCAD trimmed gains for 5-weeks straight as bulls take a corrective pattern towards the 1.3000 level in the near term. The pair is currently trading above 1.3200, coinciding with a Bollinger Band Baseline. A break below that level could trigger selling pressure toward 1.3000. The MACD indicator suggests that the USDCAD pair is trading above a pivot level as volume bars drop below the 0.000 benchmarks. If the pair fails to hold above the 1.3000 level could reinforce further selling pressure towards the 1.2325 level.
However, a failure to break below the 1.3200 psychological support could see bulls gain traction to reclaim the 1.3500 and 1.3850 levels. Upside gains are capped by the 1.3880 and 1.4500 levels. The corrective pattern could pause above the 1.3000 level.
The ActivTrader Sentiment tool suggests that 69% of traders are bullish on the USDCAD. The sentiment could be driven by technical buyers seeking a market bottom at the 1.3200 level, a previous resistance-turned-support. Moreso, Traders are closely watching US Monthly Retail Sales data for opportunities on the USDCAD. Markets are still concerned about weakening oil consumption due to swelling China Covid cases in the long term.
However, the pivot in US inflation data continues to dampen hawkish Fed sentiments. Investors are now pricing in a less aggressive policy tightening by the Federal Reserve Bank as it weighs down the US dollar. Markets are pricing in a 90% chance of 50bps at the December meeting and sentiment was confirmed by lower-than-expected US PPI data released on Tuesday.
Daily Chart Analysis
The USDCAD suffered selling pressure below the 1.35000 level and bears are currently sitting above the 1.3200 level, a previous resistance turned support. The head and shoulder pattern suggests that the pair is capped by a bearish outlook and the pair could seek lower prices in the near term. The RSI indicator is trading below the 50.00 level and the next critical level to watch out for if the price breaks below the 1.3200, 1.3000 and 1.2780 levels.
However, a hold above the 1.3200 psychological support level could give bulls another chance for a rally towards the 1.3500 and a break above that level could invalidate the current outlook. Bulls are capped by the 50-day moving average acting as a dynamic support and resistance tool. The 1.3600 remains a possible level if bulls manage to claim the 1.35000 level.