USD/CAD Looks Set For A Major Reversal

The US Dollar (USD) extended downside movement against the Canadian Dollar (CAD) on Friday, dragging the price of USD/CAD to less than 1.3100 following the release of Canadian retail sales news. The technical bias however remain bullish because of a Higher High and Higher Low in the recent wave.

Technical Analysis

As of this writing, the pair is being traded near 1.3085. A support may be noted around 1.3073, the 38.2% fib level ahead of 1.3047-3050, the confluence of 50% fib level and psychological number as demonstrated in the following four-hour chart.

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On the upside, the pair is expected to face a hurdle near 1.3106, the 23.6% fib level ahead of 1.3159, the swing high of the last major upside rally. The technical bias will remain bullish as long as the 1.2934 support area is intact which is the swing low of the previous downside move.

Canada Retail Sales

Canadian retail sales rose for a fourth-consecutive month in August, beating expectations, driven by higher sales of new trucks and alcohol.

The value of Canadian retail sales increased 0.5% to a seasonally adjusted 43.62 billion Canadian dollars (about $33.2 billion) in August, Statistics Canada said Thursday.

Market expectations were for a 0.1% gain, according to economists at Royal Bank of Canada. Excluding motor-vehicle and parts sales, retail sales were flat in August compared with the previous month, at C$32.59 billion. Economists had expected sales excluding motor-vehicle and parts to rise 0.2% in the month.

Retail sales volume, which economists say offers a better gauge of economic activity, rose 0.7% in the month.

Trade Idea

Considering the overall outlook, selling the pair around current levels could be a good strategy in short to medium term if a daily candle closes below the 1.3050 support area.

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