Canadian Dollar recovers vs. the Greenback after the release of US Industrial Production data
The Canadian Dollar (CAD) recovers against the US Dollar (USD) on Tuesday, after the release of US Industrial Production data for June surprised to the downside and shows a continued shrinking of industrial output. The data follows lower-than-forecast Canadian inflation data for June, but also below-estimates US Retail Sales data. After much volatility, the Canadian Dollar has come out on top with USD/CAD trading over 0.15% lower. The USD/CAD pair is exchanging hands in the 1.31s during the US session.
USD/CAD is in a long-term uptrend on the weekly chart, which began at the 2021 lows. Since October 2022, the exchange rate has been in a sideways consolidation within that uptrend. Given the old saying that ‘the trend is your friend’, however, the probabilities of an eventual continuation higher marginally favor longs over shorts. USD/CAD appears to have completed a large measured move price pattern that began forming at the March highs. This pattern resembles a 3-wave ABC correction, in which the first and third waves are of a similar length. A confluence of support situated in the upper 1.3000s, which is made up of several longer moving averages and a major trendline, prevented last week’s decline from extending any lower and provided a foundation for the reversal on Friday and Monday.
The long green up-bar that formed on Friday is a bullish engulfing Japanese candlestick reversal pattern. When combined with the long red down bar that formed immediately before it the two together complete a two-bar bullish reversal pattern. However, Monday’s weak close has brought into doubt the bullish conviction in the reversal and failed to confirm the bullish engulfing. It will take a decisive break above the 50-day Simple Moving Average (SMA) at circa 1.3400 to refresh and reconfirm the USD/CAD long-term uptrend. Nevertheless, bulls marginally have the upper hand, with the odds slightly favoring a recovery and a continuation higher. Only a decisive break below 1.3050 would indicate the thick band of weighty support in the upper 1.30s has been definitively broken, bringing the uptrend into doubt.
The long green up-bar that formed on Friday is a bullish engulfing Japanese candlestick reversal pattern. When combined with the long red down bar that formed immediately before it the two together complete a two-bar bullish reversal pattern. However, Monday’s weak close has brought into doubt the bullish conviction in the reversal and failed to confirm the bullish engulfing. It will take a decisive break above the 50-day Simple Moving Average (SMA) at circa 1.3400 to refresh and reconfirm the USD/CAD long-term uptrend. Nevertheless, bulls marginally have the upper hand, with the odds slightly favoring a recovery and a continuation higher. Only a decisive break below 1.3050 would indicate the thick band of weighty support in the upper 1.30s has been definitively broken, bringing the uptrend into doubt.