USDCAD bulls hit a major roadblock earlier in today’s session. In fact, it’s the same resistance area we looked at this past Monday.
The 1.3260/70 area is the intersection of the June 22nd and 25th lows and ascending channel resistance that extends from the October 2017 highs.
Today’s rejection from the area was so intense that the USDCAD lost 50 pips in just 60 seconds. It also puts the dollar pair at risk of closing below trend line support that extends from the April 17 low.
I know some will claim the 50 pip drop was the result of Canadian retail sales, CPI, or both. And you’d be correct from a fundamental perspective.
However, I can point out numerous occasions every week where fundamentals and technicals collide. At what point does it stop being a mere coincidence?
The fact is that the two (fundamentals and technicals) are not mutually exclusive. In other words, they can and do coincide and even compliment one another. Look no further than what happened to the USDCAD at 1.3260/70.
Now, keep in mind that there are a couple ways to draw the trend line you see below. One is how I plotted it on Monday, and another connects the May 22nd and July 11th lows.
If you use the former, the pair is trading below the trend line as I type this. However, if you use the two lows from May and July, the pair is just now testing the level at 1.3120.
Note that 1.3120 is also the location of a relatively significant horizontal level. As such, it may be prudent to wait for a daily close (New York 5 pm EST) below the 1.3120 area before considering an entry.
Doing so will also help you avoid entering on a Friday, which is less than ideal due to the potential for a weekend gap.
A daily close below the 1.3120 area would expose 1.3010 followed by 1.2870/80. Longer term, as long as the pair remains below that 1.3260/70 resistance area, a move toward ascending channel support near 1.2550 should not be ruled out.