USD/CAD Rises As Long Term Channel Support Holds Off

USD/CAD extended upside movement on Thursday after finding support around the long term trendline. The Sentiment remains bearish due to Lower Low (LL) on the daily chart. A break above 1.1052 would expose initially the 1.1274 resistance area.

Technical Analysis

As of this writing, the pair is being traded near 1.0908. A support may be noted around 1.0858, the trendline support as demonstrated in the following chart. A daily closing below the long term trendline will validate a deeper correction below the 1.0800 handle.

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On the upside, the pair is expected to face a hurdle around 1.1000, the 38% fib level and psychological number ahead of 1.1044, the 50% fib level and then 1.1274 that is the swing high of the previous wave.

Canada Retail Sales

Statistics Canada will release the retail sales reports on Thursday. According to the average forecast of various analysts the retail sales increased by 0.3% during March as compared to 0.5% increase in the month before. Likewise, the retail sales excluding automobiles managed to gain by 0.4% in March as compared to 0.6% increase in the month before, better than expected actual outcomes will be seen as bearish for USD/CAD and vice versa.

US Manufacturing

Markit Economics is due to release the US Manufacturing Purchasing Managers Index (PMI) today. According to the forecast of analysts, the manufacturing activity in the United States increased by 55.5 points during May compared with 55.4 points in the month before, better than expected actual reading will be seen as bullish for USD/CAD and vice versa.

Conclusion

Considering the overall technical and fundamental outlook, buying the pair on dips near the long term trendline support appears to be a good strategy. The trade should be stopped out if the price closes below the trendline support. 

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Usman Ahmed

Usman Ahmed is an individual forex trader and market analyst. He holds a Masters of Business Administration (MBA) degree. His work includes fundamental and technical reports on various currency pairs, commodity futures and stock markets. His technical analysis features price action strategies.

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