Technical Sentiment: Bullish
- Canadian Dollar received a small boost as Wholesale Sales rose 0.6% in June, above the 0.4% consensus;
- No selling pressure can be found near the resistance at 0.8331;
- A rally above 0.8331 will pave the way for more gains towards 0.8420.
CAD/CHF continues to consolidate while relentlessly probing a critical resistance near 0.8331. This signals increased pressure to exceed this level, although we might have to wait for Canada Core CPI and Core Retails Sales reports on Friday to activate this scenario.
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The Double Top reversal chart pattern, formed in July around 0.8420, seems to have run its course. Based on the 200-Day Moving Average bounce we have observed earlier this month, when markets failed to push low enough to confirm a long term bearish view, price remains in bullish territory on the Daily time frame.
In the last couple of weeks traders have been largely preoccupied with 0.8331. Initially a modest price pivot zone, after multiple daily tests and rejections this level has now grown into a critical obstacle for buyers. Additional strength is added by the 50-Day Simple Moving Average and 50% Fibonacci retracement level from 0.8427 down to 0.8235. A daily close above 0.8331 should mark the beginning of an extended rally. Notable upside targets reside at 0.8420 (resistance marked by last month’s Double Top), with a longer term attraction point at 0.8528 – defined by a huge price pivot zone dating back to 2013.
Failure to overcome the resistance immediately does not represent a bearish signal, since price has been consolidating in a very choppy manner between 0.8266/81 and 0.8331. A dip below 0.8266 could signal another re-test of 0.8237; however downside potential is limited while CAD/CHF continues to trade above the 200-Day Moving Average.
Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets