The USDCAD is trading higher this Friday after downbeat Canadian Retail Sales data hit the newswires. The Canada Retail Sales registered at -1.2%, which was lower than the 0.5% projected figure and also lower than the previous figure of -0.1%.
The Core Retail Sales figure, which is the market moving indicator, came in at -0.5%, which was less than the 0.2% that analysts had projected and also lower than the previous month’s figure of -0.1%.
As a result, the USDCAD spiked nearly 50 pips to 1.3180, but has since retraced slightly with potential for more upside push on the day.
The response of the USDCAD to the Canada Retail Sales and Core Retail Sales data has taken the pair off the lower border of the falling wedge on the daily chart and towards the upper border of the wedge, where it is now threatening a breakout. We need to see a 3% penetration break to the upside or two successive daily candle closes above the wedge to confirm this move.
A successful break has a number of upside targets. There is the 1.3203 price level which is the immediate upside target (previous high of October 30 as well as several clusters of lows seen on Aug 9-12, Sep 5 and Nov 19-20). Above this level, the price area that extends from 1.3297 to 1.3348 (green box) comes into play. This area would have to be broken by strong bullish action to target 1.3432 and 1.3523.
On the flip side, failure of the wedge break returns price action to the lower border of this wedge at 1.3150 (lows of Feb 4 and Dec 18). Below this area, the pair could target 1.3027.