The Canadian dollar continued to retrace from the 1.1384 high made on Wednesday after a report showed that inflation remained at the Bank of Canada’s 2.0% target. Canada’s CPI did slowed down from the 2.1% pace set in August. With deflation fears running wild across most of the advanced economies, today’s release supports the Bank’s bias that inflation will remain around the 2.0% level.
Price action on the daily chart shown above highlights the relentless rally since July may have formed a three-drives-to-a-top pattern. This reversal pattern could target a retracement towards the 1.12 handle. It is around that area we could see price stabilize. Eventually, we may see a move a consolidation towards 1.10, but the current rally may continue if we see oil prices below 78.00. Key upside for USD/CAD will be the 1.15 handle
The trade: Sell USDCAD at 1.1245 with a stop loss at 1.1260 and a take profit at 1.1215. The Risk/Reward Ratio is 1:2
Edward J. Moya
WorldWideMarkets Online Trading