The best performing currency this past week was the Canadian dollar, which rose more than 1.5% against the greenback. This move drove USD/CAD from a high of 1.3125 down to a low of 1.2825. The loonie’s gains were sparked by a sharp rebound in oil prices, stronger Canadian data and reports that the Trump administration dropped its demand that all vehicles made in Canada for export contain at least 50% U.S. content. According to Friday’s reports, Consumer price growth accelerated significantly in the month of February with the year over year rate rising to 2.2% from 1.7%. Retail sales growth overall fell short of expectations but excluding autos, demand rose more than expected by 0.9%. This bodes well for next week’s January GDP report, which should show growth strengthening at the start of the year.
On a fundamental and technical basis, USD/CAD appears positioned for a move below 1.28. Technically, it closed the day below the 20-day SMA for the first time in 7 weeks. 1.2800, the March 12 low is a natural support level but the decline should extend further as primary support hovers closer to 1.27. This is where the 100-day SMA, 23.6% fib retracement of the 2016 to 2017 decline and the 38.2% Fib retracement of 2011 to 2016 rally converge.
