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USD/CAD printed a major bearish engulfing and a false breakout through a confluence area signaling that the upside is limited and that the bears could take full control again. The pair has rebounded a little, but this was only a temporary one.
The Loonie is very strong in the short term after the Canadian retail sales data have come in better than expected. In the short term, the USD was punished by the Flash Services PMI, Flash Manufacturing PMI, and by the Unemployment Claims poor data.
FOMC members' speeches could shake the market a little today. Also, the Durable Goods Orders is expected to rose by 0.7% in August versus the 0.1% drop in July, while the Core Durable Goods Orders may register a 0.5% growth versus 0.8% in the last reporting period.
The US data could be decisive during the week. Better than expected data could boost the greenback which poor figures could force it to depreciate. The Dollar Index stands near a dynamic resistance waiting for a bullish spark.
USD/CAD dropped below the uptrend line, this was the first sign that the pair may develop a downwards movement. It has bounced back to retest the broken line. As you can see on the H4 chart, the pair has printed a false breakout through the confluence area formed at the intersection between the uptrend line with the descending pitchfork's median line (ml).
The false breakout through this confleunce area signals that the pair could move in the opposite direction, so further drop is imminent. Still, the rate could move sideways in the short term before going down.
It could test and retest the median line (ml) before deciding direction. Stabilizign under the median line (ml) could really announce a deeper drop.
The false breakout through the confleunce area may signal a sharp drop. A new lower low, a bearish closure below 1.2633 could activate a new selling opportunity with a potential downside target at the lower median line (lml).
Personally, I believe that only failing to stay below the median line (ml) could invalidate the bearish scenario.
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