Today, the calendar is pretty empty, and the most important data will come from Canada, where we’ll find out the latest retail sales numbers. From March 2020 until May 2021, USD/CAD was in a deep-down trend. Since May, we’ve been experiencing a bullish correction.
A correction is shaped like a wedge, so it promotes the breakout to the downside and, consequently, a continuation of the primary bearish trend. Interestingly, most recently, the price hit the 38.2% Fibonacci level, which should never be ignored. The USD/CAD tested that level and bounced. At the same time, we tested the upper line of the wedge. Additionally, we did this for a second time this year, which opens up a possibility for a double top.
The next few weeks will be bearish for USD/CAD. This trade has a great risk-to-reward ratio, and the potential target for the current drop is on the 23.6% Fibonacci, so still far away. The negative sentiment will be canceled when the price comes back above the 38.2% Fibonacci, but chances are somewhat limited.
