On Thursday, Statistics Canada showed retail sales beat the analyst forecast of 0.3% and rose 0.8% to $48.6 billion in April. Sales were up in 9 of 11 subsectors, representing 71% of total retail trade. Excluding sales at motor vehicle and parts dealers, retail sales climbed 1.5%.
Expectations for a Bank of Canada rate hike as early as next month rose to 34% from 25% before the retail sales report. The market is widely pricing in a rate hike to occur in 2017.
Price action on the USD/CAD daily chart shows the tentative drop below the 200-day SMA. To the downside, initial support may come from 1.3070 level. Major support may come from the 1.2871 region, it is around that area that price could form a bullish butterfly pattern. If we see a return of the bullish stance, key resistance will come from the 1.3300 to 1.3350 zone. If we see a major greenback recovery, major resistance will come from the 1.3500 level
The trade: Sell USD/CAD at 1.3275 with a stop loss at 1.3325 and take profit at 1.3125. The risk/reward ratio is 1:3