The currency pair dropped today and invalidated the yesterday’s breakout above a dynamic resistance. Price has come down again as the USDX failed to reach new highs and because the Loonie received support from the Canadian data.

Price could still increase again in the upcoming period as the dollar index may increase further towards the 97 level in the upcoming weeks if the US data will come in better.  USDX is located in the buyer’s territory and should climb much higher even if has shown some exhaustion signs. USD/CAD drop was somehow expected after the impressive rally, but this could be only temporary and the USD will take the full control again and will lead the rate towards fresh new highs.

The Loonie received support from the Building Permits, which increased by 3.8% in September, beating the 0.7% estimate, while the Housing Starts were reported at 223K, much above the 211K estimate and above the 219K in the former reading period. The US released only the Crude Oil Inventories, which were reported at 2.2 million barrels in the former week.

You can see on the USDX’s daily chart that price consolidates the latest gains and should climb towards the upper median line (UML) of the major descending pitchfork. Technically, it should climb towards new highs as the Inverse Head and Shoulders pattern was confirmed. USDX maintains a bullish perspective as long as is trading above the 250% Fibonacci line (ascending dotted line).

Price failed to stay above the median line (ml) of the blue descending pitchfork, could retest the median line (ML) of the major descending pitchfork and also the uptrend line. We’ll see how will react when will hit the confluence area formed between the ML with the black uptrend line, a breakdown though it will accelerate the sell-off. We may have a buying opportunity after a valid breakout above the 1.2803 static resistance and above the upper median line (uml) of the red ascending pitchfork.