[DanRath]

Risk sentiment has returned to centre stage following yesterday’s U.S. retail data. Not that risk sentiment was far from investors’ minds, but for a while it almost seemed as if fundamental news was becoming more important and was at least sharing the stage with risk sentiment. Not any more. For the next few days, if not weeks, the market will again look at data releases, political comments and central bank remarks through the lenses of risk sentiment. And sentiment can be very fickle, sometimes turning on a dime. The market will not be forgiving if the number surprise to the upside in a meaningful way, which could open the door for a further rally in USD/CAD.

Short-Term Outlook: Retracement Resistance Located at 1.1811 and 1.1869
USD/CAD pierced the second hourly descending channel pattern yesterday with a break above 1.1660 and continued to rally through resistance at 1.1677 and 1.1714. These resistance levels have now turned into support levels and selloffs toward these levels should see buying interest return for a test of 1.1811 and 1.1869.

Medium-Term Outlook: Descending Channel Pattern Broken
USD/CAD closed at 1.1759 yesterday, well above the descending trendline resistance at 1.1689. The descending channel pattern from April 21 is now in tatters and a more sustained retracement phase seems to be unfolding. The initial medium-term topside target comes in at at 1.1869, followed by the 50% Fibbo retracement at 1.1990. Former trendline resistance now turns into key support at 1.1689, with secondary support at 1.1477.