USD/CAD rallied above its two-week trading range after the Bank of Canada left monetary policy unchanged and reduced their GDP forecasts for Q4, 2015, 2016 and 2017. The bank was optimistic regarding how the economy was holding up against slumping oil prices, but the loonie was heavily sold as further easing remains a possibility. For the remainder of the year, if we continue to see weaker data from Canada, we would not be surprised if USD/CAD made fresh 2015 highs.
Price action on the USD/CAD daily chart shows the key breakout above the two-week range also respected the 100-day SMA. Although the headline retail sales number was better than expected 0.5% vs. 0.1%, the ex-auto number was flat on a 0.2% forecast leaving questions about the consumer sector largely unanswered.
Major resistance remains the September 29th high 1.3456, that is where price formed a bearish ABCD pattern. Point D was targeted by the 161.8% Fibonacci expansion level of the B to C leg. If the current uptrend continues, 1.3626 may provide key resistance.
If the currency pair is unable to make new highs, it could fall towards the 1.30 support level. A breakdown below here could see downside target the 1.2670 region.
The trade: Buy USD/CAD at 1.3075on the dip with a stop loss at 1.2975 and take profit at 1.3275. The risk/reward ratio is 1:2