CAD continues to weaken against the USD, on course to close a 3rd consecutive week of losses. The cross remains influenced by rising treasury yields and the strong retail sales release in the US.
-However, the CAD continues to be one of the top performers against most G10 currencies, even as weak data from China negatively affects oil products, which are strongly linked to the Canadian dollar.
-Inflation growth in Canada also supported the CAD, while the Raw Material Price Index reported a decline.
-Meanwhile, retail sales data with the US rose due to the strong holiday period.
-Swap markets are reducing their dovish expectations for March, dropping to a 51.4% chance of rate cuts at the end of Q1 due to strong data on the US economy, which in turn supports a rise in the USD. The chances of a reduction in interest rates at the BoC for their meeting on January 24 are 12.7%, while for March – only 12.6%, which gives additional impetus to the US dollar.


-Scotiabank says that if markets continue to reassess the Fed’s March risks, the US dollar is likely to strengthen its up momentum.
-ING believes that US inflows should continue to be a key driver for CAD in crosses, given its high correlation with US economic sentiment.

Currently, USD/CAD is attempting to break 200MA, continuing its consolidation in the trading range with a lower limit of 1.3451 (38.2FIBO) and an upper limit of 1.3435 (50.0FIBO), trading near the lower range after a bounce from the levels.
-Demarker Oscillator holds in the overbought zone after a slight reversal from the record high levels.
-Sequential with a print of up 3, confirming the beginning of an up pulse.
-Expectations are for liquidity to break around 1.34 levels (slightly below 38.2FIBO), which provides a good entry point for swing traders to take long positions.

Q1 bank expectations offer a wide trading range with a low of 1.31 and a high of 1.39, with the average value being 1.35, indicating that the cross is currently trading at the bottom of the range.
I am waiting for a potential liquidity robbing spike around 1.34 levels where I will take long positions with SL below 1.3320 (below 23.6FIBO) with a mid term target of 1.37 levels
Alternative: A break and close below the 23.6FIBO levels will trigger a down momentum as the bullish scenario breaks down.

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