USDCAD was previously trading inside an ascending channel pattern before breaking lower to signal a reversal. Price hit a low of 1.2762 before pulling up and indicating that a retracement to the broken support area could be in order.
Applying the Fib tool on the latest swing high and low shows that the 61.8% level is closest to the broken channel support around the 1.3000-1.3050 area. This is also close to the moving averages, which have just shown a downward crossover to show that selling pressure is strengthening.
Stochastic is already indicating overbought conditions and is starting to turn lower, which also confirms that sellers are taking control of price action. If any of the Fib levels keep gains in check, price could head back to the previous lows near 1.2750 or much lower as the downtrend resumes.
Crude oil prices have been weaker on Monday as traders probably booked profits off last week’s rallies. In addition, the September futures contracts are expiring and are set to be replaced by the October contracts which have opened lower.
Data from Canada was better than expected as it showed a 0.7% gain in wholesale sales versus the estimated 0.5% uptick. However, this was much weaker than the previous 1.9% gain. Also, traders were already able to see the retail sales figures for the same month and the results were much weaker than expected.
Only medium-tier reports are due from the US today as traders are paying more attention to Fed rhetoric ahead of the Jackson Hole Symposium. So far signals have been mixed since the FOMC minutes seemed cautious while a few speeches from Fed officials recently showed hawkishness. The US dollar could find direction once Fed Chairperson Yellen gives her speech.
US crude oil inventories are up for release on Wednesday and another draw in stockpiles could revive crude oil gains. Durable goods orders data are lined up for Thursday and the US preliminary GDP reading is due on Friday.
By Kate Curtis from Trader’s Way