USD/CAD is Driven Lower by Both Technicals and Fundamnetals

Recent Economic News

If we look at yesterday’s calendar, fundamentally it should not be a surprise, as we had important data for both currencies, traditionally at the same time. The preliminary GDP in US was worse than expectations and Core Retail Sales in Canada was better than expectations. This is bearish for USD and bullish for CAD, so in consequence negative for the USCAD. So how did that play out?

USD/CAD Technical Analysis

From a technical point of view, it worked out great! For the past weeks, the USDCAD was drawing a Head and Shoulders pattern (yellow). Interestingly, the head itself was also a false breakout above the horizontal resistance on the 1.295 (blue). A false breakout is usually a great signal in the opposite direction and when combined with a head and shoulders pattern…wow. So most recently, the USDCAD managed to break the neckline (red) of the Head and Shoulders pattern, which in theory brings us a proper long-term sell signal.

USD/CAD Price Forecast

The target for this movement is on the long-term up trendline (black), which connects the lows from June 2021 and April 2022. With the current situation, getting there seems like the most likely plan. The sell signal will be cancelled, when the price comes back above the blue resistance but chances for that are now rather limited.

For a look at all of today’s economic events, check out our economic calendar.