The USD/CAD formed a double top on Friday after better-than-expected employment data gave the CAD a boost. However, as risk aversion from the Eurozone pushed up the USD, as well as pressured oil prices, which is correlated to the loonie.
The USD/CAD therefore invalidated the double top patter and rallied back toward last week's high. Last week, the market cracked a key resistance at about 1.0050 and reached 1.0060. To start this week, during the 5/14 US session, the USD/CAD held below 1.0050 again.
Risk sentiment will be key to shaping the USD/CAD's path in the next few days, as most of this month's key US and CAN releases came in the last couple of weeks. There are some US releases like retail sales but its going to be the risk sentiment from those releases that determine the strength of the USD. (USD will gain in risk aversion, fall in risk appetite). The FOMC meeting minutes could be surprise if it brings up QE, but most likely will not in my opinion.
With risk appetite, the USD/CAD has a bearish outlook. The market has the 0.9950 level in sight in the short-term. For now, the bearish outlook is within a ranging market, so the target is limited to the middle of the consolidation range. Note that this is above the 50% retracement and the 200 SMA in the 4H chart, so reaching this level would even be within the context of a developing bullish market.
Risk aversion can continue to boost the USD vs. CAD with a push above 1.0060 opening up 1.0100 as well as opening up the bullish outlook toward the 1.03 handle, and a resistance pivot at 1.0315. Note that in the daily chart, a break above 1.0060 would also clear the 200-day SMA, and provide a bullish signal as well.
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