The USD/CAD dropped significantly today and approaches a very strong and critical support level. Price has retested an important resistance level and failed to pass it and now could drop further if the USDX will fail to resume the upside movement.

Right now we’ll be better to stay away from this pair because we don’t have any trading opportunity, but maybe we’ll have one very soon. It is very important to see what will happen on the USDX because a further increase will force the USD to take the lead again and to drag the rate higher again.

The Loonie increased in the afternoon, even if the Canadian data have come in worse than expected, the GDP dropped by 0.1%, even if the specialists have expected to see a 0.1% growth, the RMPI dropped by 0.3% versus the 2.8% growth expectations, while the IPPI rose by 0.1%, less versus the 0.4% estimate.

On the other hand, the USD dropped further even if we had some very good economic data from the US, the Unemployment Claims dropped from 229K to 215K in the previous week, the Personal Income, Personal Spending and the Core PCE Price Index have come in line with expectations. Unfortunately, the Revised UoM Consumer Sentiment dropped to 101.4, from 102.0, much below the 101.9 estimate.

The rate dropped after the retest of the upper median line (uml) of the blue descending pitchfork and now could retest the upper median line (UML) of the red ascending pitchfork. A valid breakdown below the upper median line (UML) will confirm a further drop on the short term, while a jump above the upper median line (uml) of the descending pitchfork will signal a significant increase. The second scenario will take shape only if the USDX wil resume the minor rebound.