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Bulls Lack Conviction Above the 1.3700 Handle

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USD/CAD PRICE, CHARTS AND ANALYSIS:

  • USDCAD is Intriguing at Present as the Loonie and USD Cancel Each Other Out Facilitating a Period of Consolidation
  • Canadian Retail Sales Stagnate Despite an Upward Revision to Last Months Print.
  • The Drop in Canadian Inflation Data and Stagnating Retail Sales Point to a Hold from the BoC Next Week.
  • To Learn More About Price Action,Chart Patterns and Moving Averages, Check out the DailyFX Education Series.

Read More: The Bank of Canada: A Trader’s Guide

USDCAD price action continues to frustrate and confuse market participants as the usually trending pair has remained relatively rangebound for the past two weeks. The pair has struggled to break out of the 1.3570-1.3780 mark (most recent high and low) as the stronger Dollar has kept the bulls interested. The higher oil price seems to be helping the loonie and keeping USDCAD from advancing beyond the 1.3700 level for now.

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CANADIAN RETAIL SALES DATA AND BANK OF CANADA

Canadian Retail Sales appeared to stagnate is September while the August print was revised from a previous -0.3% to a print 0f -0.1%. The August retail turnover however should be taken with a pinch of salt given the port strikes in British Columbia. 12% of surveyors reported lower business activity because of issues with supply chain logistics caused by the strikes.

Source: Statistics Canada

A positive for the Bank of Canada (BoC) as Canadian inflation slowed down in September despite the increase in fuel prices. The Core and Headline rate coming in below expectation and will certainly help given the pessimistic tone we heard recently from Deputy Governor Vincent. The inflation release and stagnation in Retail Sales should surely mean a pause from the BoC at next week meeting. Markets participants are currently pricing in an 84.1 chance that rates will be held steady and just a 15.9% chance of a 25bps hike. The BoC meeting is scheduled for next week Wednesday, October 25 at 14h00 GMT.

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For all market-moving economic releases and events, see the DailyFX Calendar

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TECHNICAL ANALYSIS USDCAD

USDCAD failed in its attempts to pierce through the 1.3700 resistance area. This is the second failed attempt in the last two weeks, the previous of which fell just short around the 1.36920 mark.

At the moment it really is a tug of war between USD and CAD bulls which seem to be canceling each other out. On the surface it does appear the USD is a more attractive proposition but given the current climate the CAD has been able to hold its own. The CAD is largely deriding its strength from higher oil prices, as the drop in inflation and stagnation in retail sales should’ve have aided the bulls in facilitating a break above the 1.3700 mark.

In other words, the longer there is concern about escalation in the Middle East the US Dollar and Oil prices are likely to remain supported. This in turn could mean more rangebound price action for USDCAD. An improvement in sentiment however could be just what the Doctor ordered for CAD bulls to look at a push toward the 1.3500 mark and potentially lower.

Key Levels to Keep an Eye On:

Support levels:

Resistance levels:

USD/CAD Daily Chart

Source: TradingView, prepared by Zain Vawda

IG CLIENT SENTIMENT

Taking a look at the IG client sentiment data and we can see that retail traders are currently net SHORT with 67% of Traders holding short positions.

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of clients are net long.




of clients are net short.

Change in Longs Shorts OI
Daily 6% -17% -10%
Weekly 1% -3% -2%

— Written by Zain Vawda for DailyFX.com

Contact and follow Zain on Twitter: @zvawda

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