Analyzing the USD/CAD charts, we can see a bearish setup. If we look at yesterday’s calendar, we had important data coming out for both currencies simultaneously.
The preliminary GDP in the US was worse than expectations and Core Retail Sales in Canada were better than expectations. This is bearish for USD and bullish for the CAD, so in consequence negative for the USD/CAD.
The USD/CAD has been drawing a head and shoulders pattern (yellow) for the past weeks. Interestingly, the head was also a false breakout above the horizontal resistance on the 1.295 (blue). A false breakout is usually a great signal in the opposite direction. Recently, the USD/CAD managed to break the neckline (red) of the head and shoulders pattern, which in theory brings us a proper long-term sell signal.
The target for this movement is on the long-term up trendline (black), which connects the lows from June 2021 and April 2022. With the current situation, getting there seems like the most viable plan. The sell signal will be canceled when the price comes back above the blue resistance, but chances are now somewhat limited.
