We were surprised by the power of the rally in USD/CAD today. USD was weak on most crosses after a dovish FOMC statement but the Canadian dollar was swamped by soft data on retail sales.
From a fundamental perspective we maintain our bearish USD/CAD stance. The market had only the faintest hope of eventual FOMC rate hikes ahead of the meeting while Canadian retail sales have risen in 12 of the past 14 months. Today’s miss is just a blip in a strong trend.
From a technical perspective, however, we want to be long USD/CAD. We might see a slight pullback in the hours ahead but we will be looking to buy. Here’s how the daily chart looks.
USD/CAD has rallied in three straight sessions. We breached the 200-day moving average and several other resistance levels today. We are partially wary of downtrend resistance but don’t see it as a major hurdle. The RSI is neutral and oil also broke down today.
We like the upside for a test of 1.0679 and perhaps 1.0853.