Canada's retail sales came in above expectations, keeping downward pressure on USDCAD. The pair traded lower on the day, though it has bounced modestly from its session lows. As a quote of the U.S. dollar in Canadian dollar terms, USDCAD falls when either the greenback weakens or the Canadian dollar strengthens, and the retail sales beat speaks to the second driver: retail sales are one of the primary consumer-demand indicators the Bank of Canada monitors, so surprises in the report are a recurring source of volatility for the currency.

The week's broader move has been firmly to the downside. Selling accelerated following a U.S. Treasury announcement earlier in the week, while ongoing discussions surrounding the framework for a U.S.-Canada trade agreement have also helped underpin the Canadian dollar. The trade angle carries particular weight for the currency because the bulk of Canadian exports are destined for the United States, leaving the Canadian dollar closely tied to the state of bilateral trade relations.

On the charts, USDCAD began the week by moving into a key support area defined by a lower channel trendline and the 200-day moving average near 1.3846. Buyers leaned against that support and pushed the price higher on Tuesday and into Wednesday. The rebound, however, stalled ahead of the 100-day moving average at 1.39138, with sellers also defending last week's midweek low near 1.3908. The 100- and 200-day moving averages are widely followed benchmarks of medium- and longer-term trend, which is why the price action between them draws heavy attention from chart-based traders.

That failure proved pivotal. As U.S. dollar selling intensified in the wake of the Treasury announcement, USDCAD tumbled back below the 200-day moving average and the lower channel trendline, deepening the bearish technical bias. The pair subsequently broke below the 61.8% retracement of the move up from the May low at 1.38169, opening the door toward the next key swing area between 1.3765 and 1.3778. The 61.8% level is one of the most commonly watched Fibonacci retracement thresholds among traders.

That zone was broken yesterday, but the move could not be sustained and the price bounced back higher. Today, sellers returned and pushed the pair back below the swing area, with USDCAD reaching a new weekly low at 1.3733, the weakest level for the pair since the May low that began the up-move now being retraced.

The 1.3765–1.3778 swing area now stands as the key close-risk level for sellers. Staying below it keeps sellers firmly in control and leaves the downside bias intact. A move back above 1.3778, however, would represent another failed break below that support and could lead to some disappointment among sellers. That would shift the focus back toward the broken 61.8% retracement at 1.38169. Above that level, traders would look toward the underside of the broken channel trendline, currently near 1.3824 and moving lower.

For now, sellers remain in firm control below 1.3765–1.3778.

Source: Investinglive