The US dollar futures were up on positive results (sequester induced) showing that the trade deficit sank 12.9 percent to a deficit of $34.3 billion, according to data by the Commerce Department. The dollar futures traded back through the 78.6 percent Fibonacci retracement level, heading to the 30-day high of 81.335. However, the 4H chart is showing indication that current price action is reaching resistance near 81 to 81.06 with the positive directional movement indicator pulling back. This could be a potential signal for a minor pullback. However, a close above 81 is a positive signal to push higher.
The USDCAD is pushing higher on the day as the Canadian dollar slumps both on lower energy prices and poor data, whereas the US dollar is getting support through stronger fundamentals. “A lot of it is lower energy imports, signaling that the big trade deficit we’ve been seeing in the past few years will be shrinking gradually, which is dollar positive,” said Charles St-Arnaud, FX strategist at Nomura Securities.
Price action is quickly approaching the 1.0800 target issued on December 22 in “USDCAD Outlook,” which has increased nearly 200 pips since December 23 low of 1.0580.
The weekly chart shows strengthening movement, and this movement is likely to push the pair through to 1.0855 before seeing some resistance. A pullback to 1.0704 could happen in US economic data slacks with secondary weekly support at the December 23 lows. Bank of Canada (BoC) Governor Stephen Poloz warned of potential deflationary circumstances in Canada, and the ongoing bearishness will drive the pair higher.