USDCAD expects crazy week inside pennant formation
20 March 2023
This week will be interesting for the USDCAD. From the USD side, it will be, of course, the interest rate decision on Wednesday, but we will also have some market movers from Canada, such as the inflation data on Tuesday and the retail sales on Friday.
Ahead of this data, the USDCAD is awaiting inspiration inside of a sideways trend that can be described as a pennant (red). The volatility in the previous week decreased dramatically after a huge rise in the second week of March. In general, the sentiment is definitely positive. We are still under the influence of a bullish breakout from a giant symmetric triangle pattern (black). The recent pennant is a horizontal correction following the breakout, which generally shows the strength of the buyers. We are still above key horizontal support on 1.368 (green) as well and as long as we stay above this area, the sentiment remains positive.
The price dropping below the green support and breaking the lower red line would be a sell signal but chances of that happening right now are low. Unless, of course, we don’t get strong data from Canada and disappointing ones from the US, which would fundamentally drag this pair lower.