Overview:
USD/CAD is consolidating as markets are waiting for 15:00 GMT Bank of Canada interest rate decision and Monetary Policy Report: Central bank expected to stand pat on its policy rate at 1.00%. USD/CAD is undermined by unexpected 0.2% rise in Canada November retail sales (vs. forecast for no change); positive investor risk sentiment; buoyant commodity and oil prices (Nymex crude settled up 68 cents Tuesday at $96.24/bbl); sovereign demand for CAD. But USD/CAD downside is limited by CAD sales on retreating CAD/JPY cross as market participants take profit on yen-shorts. Daily chart is still positive-biased as MACD and stochastic are bullish; five-day moving average is above 15-day MA and rising.
Preference:
Buy above 0.99 with targets at 0.9945 and 0.9975 in extension.
Resistance levels:
R1 - 0.9946 (Tuesday's high, matching Friday's high)
R2 - 0.9976-0.9981 (Dec. 31 reaction high -- 200-day moving average)
R3 - 0.9991 (Nov. 20 high)
Alternative scenario:
Sell below 0.99. Below 0.99 look for further downside with 0.99 and 0.985 as targets.
Support levels:
S1 - 0.99 (Tuesday's low)
S2 - 0.9849 (Friday's low)
S3 - 0.9811 (Jan. 11 near-three-month low)
Technical comment:
A support base at 0.99 has formed and has allowed for a temporary stabilization.
