US dollar the focus today
The USDCAD has been impacted more from developments and comments from BOC officials over the last few days. BOC's Wilkins and Poloz were more hawkish in their comments this week. Their comments sent the pair to a key support area defined by swing levels going back to January, February and April. That support comes in at 1.3308-11 (the low in April stalled just above that area at 1.3223). Yesterday, the price moved to that low and bounced modestly (the high reached 1.3246).
Today, the pair has been more reactive to the USD and the weaker US CPI and retail sales data. The price has moved below the support level and extended to a low of 1.3164.
The price is correcting off that low and trades at 1.3194 currently. Look for traders to lean on a test of the 1.3208-11. If the price stays below it is more bearish. A move above is more bullish.
Drilling to the daily chart, the pair has a trend line support at the 1.3141. The 50% of the move up from the April 2016 low comes in at 1.31262. Those are the next targets for the pair should the sellers keep the pressure on.
A move above the 1.3208-11 and then 1.3223 should solicit more covering.
PS. The CFTC commitment of traders report last week showed the CAD position remained near record short levels (see report here). That may also contribute to the selling of the USDCAD as those shorts (in CAD) get squeezed by the BOC comments AND the weaker US data today.
