USD/CAD is trading in the red at the 1.2514 level and it could drop after retesting the weekly pivot point (1.2528). The pair is still expected to drop after escaping from a major upward channel. Now it has moved sideways, so we'll have to wait for confirmation before taking action again.
Unfortunately, USD buyers are still disappointed after the US inflation data. The USD depreciated despite a positive report on the US PPI and Core PPI that increased by 1.0% beating expectations. The Unemployment Claims came in line with expectations, but the greenback was too overbought to be able to appreciate.
The pressure is high on the USD after the Prelim UoM Consumer Sentiment was reported at 70.2 points, below 81.2 estimates.
USD/CAD Retests Resistance
USD/CAD has increased a little to retest the weekly pivot point (1.2528). It could drop deeper as long as it stays under this level. It has failed to reach the weekly S1 (1.2476) in the last attempt, that's why it has come back to reach the pivot point.
Dropping and reaching the S1 may also signal an imminent downside breakout through it. Falling and closing below Wednesday's low of 1.2489 may signal more declines ahead.
Techncially, USD/CAD has printed something like a Head & Shoulders pattern. A valid break through the S1 could validate this pattern. Also, such a break below the S1 could activate a strong sell-off towards the S2 (1.2400).
Only a jump above the weekly pivot point of 1.2528 could really invalidate the downside scenario.
Forecast
A drop and closure below 1.2489 could activate a deeper drop in the upcoming period. 1.2422 low could be used as a downside target. The downside scenario could be invalidated by a new higher high.
