The retracement witnessed on Friday on the USDCAD seems to have stalled after downbeat Canadian core retail sales data hit the newswires. Canadian core retail sales for February 2020 came in at -0.1%, which was worse than the consensus number of 0.2% and the previous number of 0.5%. The core component of this report is considered the more important of the two figures, which also features the retail sales data.
The downbeat Canadian core retail sales data took the steam out of the Canadian Dollar, which had found some strength this Friday after crude oil prices on the Brent benchmark had surged to as high as $32 intraday. However, crude prices are now trading lower, and the added factor of the downbeat Canadian core retail sales data has helped limit the pullback of the USDCAD from the 2016 highs achieved yesterday.
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Technical Outlook for USDCAD
Following the cutting of interest rates by the Bank of Canada and the steep fall in crude oil prices over the last two weeks, the US Dollar has had a remarkable run against the CAD during the previous four days, going as far as hitting the 1.46674 price level. This price point was very close to the 1.46899 high seen on the 18 January 2016. However, the formation of a doji candle yesterday and the subsequent bearish candle have set up the evening star formation on the daily chart, which will require a breakdown of the 18 January 2016 weekly candle’s low for further downside retracement to continue.
Therefore, a close below the 1.41144 support (18 January 2016 weekly candle low) by a 3% penetration opens the door for further strengthening of the Canadian Dollar, but this has to be accompanied by a rise in crude oil prices to give this move some added strength from the fundamental side of things. This move could bring into focus support levels at 1.40023 (8 February 2016 and 9 March 2020 highs) and 1.37269 in the medium term.
Further continuation of price from the present levels could target a retest of 1.45177 (4 January 2016 high) and yesterday’s high at 1.46674.
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