The USD/CAD minor correction was somehow expected after the impressive rally and after the failure to reach the 1.3344 major static resistance. The question is: could the pair make a deeper correction?
You should be ready for some volatility today as the US is due to release Retail Sales data, the Industrial Production, Capacity Utilization Rate, Prelim UoM Consumer Sentiment, and the Business Inventories. Some poor data will attract more sellers which will force USD/CAD to drop deeper, while better than expected numbers will boost the price.
USD/CAD has failed to stay above the median line (ML) of the ascending pitchfork and now it has decreased as low as 23.6% retracement level after the bearish divergence signaled by the MACD and Stochastic indicators.
A valid breakdown below the SL2 and below the 23.6% level will confirm a further drop towards the 38.2% level. The first inside sliding parallel line (SL) could represent a target as well. Another lower low, a drop below the 23.6% and below the 1.3235 will signal a larger corrective phase.
Trading RecommendationsWe may have a selling opportunity after a valid breakdown below the 23.6% retracement level with a first target at the SL and lower at the 38.2% level, Stop Loss should be placed right above a former highs such as 1.3270.
A potential larger drop could be invalidated by another false breakdown below the 23.6% level, so a pin bar or a bullish engulfing on the near-term static support could signal another bullish momentum towards the 1.3344 major resistance, a valid breakout above it will validate a further increase on the medium to the long term.