The USDCAD is testing the 1.3100 psychological resistance level on the back of June’s disappointing Canadian Retail Sales figures. The USD has spiked close to 75 pips against the Canadian Dollar, after the Retail Sales came in at 0.1% as against the 0.3% that the market was expecting. The core component (Retail sales ex Autos) also disappointed, coming in at -0.3% as against the 0.3% market consensus figure. Of these two, the Core Retail Sales has the greater impact.
Explaining the Huge Spike on USDCAD
The deviation of the actual number from the consensus figure for the Core Retail Sales was 0.6%, which was double the deviation between the consensus and the previous number (0.0%). This is why the initial spike was on the heavy side. The wider these deviations, the greater the initial spike seen on the news trade.
After testing the 1.3100 level, the initial spike has retraced and the hourly candle has closed just below the key resistance at 1.30397. This is also the 61.8% retracement level from the swing high of July 9 to the swing low of July 12.
Can the news take the price of the USDCAD beyond this level? An upside break will invalidate this resistance which has held firm all week long, targeting the 1.31193 level (R1 pivot and 78.6% Fibo level).
Failure of price to break this level will lead to resumption of the pattern seen all week, where USDCAD has sold off from 1.30937 to 1.30493 and below. The Canadian Retail Sales report may have just given traders cheaper levels at which to sell the USDCAD.Don’t miss a beat! Follow us on Twitter.