On Thursday, the USD/CAD currency pair extended a bearish price series ahead of the U.S. retail sales report, due out on January 26. The report is expected to show flat spending for December, and the U.K. Confidence survey is expected to show a slight drop in consumer sentiment. The dismal data could keep the Canadian dollar under pressure and encourage the Federal Reserve to delay normalization of monetary policy for a while. The weak data might also push the USD/CAD to a further depreciation ahead of the next FOMC interest rate decision on January 26, which will only further fuel the recent volatility in retail sentiment.
The bearish price series is still intact, with USD/CAD testing its December 2021 high. The pair also failed to defend its monthly opening range. This is a bullish sign, but the downside risk is that the lack of speed could push it back. The bulls’ expectation is that the pair will trade above the 200-day SMA on Thursday. However, the bearish price pattern is still very bearish, and there is a high chance of a correction.
The USD/CAD has reached a fresh monthly low of 1.2563 and has bounced back from it. But the recent series of highs and lows has taken it below its 200-day SMA. The pair also has a bearish price pattern. On the downside, USD/CAD should break or close under a few key levels before it can move higher. The region between 1.2410 and 1.2440 represents a 23.6% and 100% expansion.
The long-term outlook for USD/CAD remains bullish. The Federal Reserve has signaled it will normalize monetary policy by the end of 2016, so the bearish price action is unlikely to last much longer. If the pair fails to hold the ascending channel, it may extend the bearish price series, with the chances of a more pronounced decline.
After a low setback on December 20, the USD/CAD failed to defend its monthly low of 1.2531. It has been trading below the 200-Day SMA since November. A break below the October low would open up the 1.2260 zone for the US. While the long-term outlook for USD/CAD remains bullish, it’s important to note that a number of factors are affecting the price trend. The central bank has been following the hawkish tone by stating that the US economy is on track to return to normalization in 2016.
USD/CAD has broken the December low. It failed to defend its monthly opening range, as it failed to break the December low. It has a bearish price series before the US retail sales report, which will put more pressure on the currency. It should break or close below the October low in order to extend its bullish momentum. There is also a high probability that USD/CAD will retest the lower low.