The Canadian dollar is in focus tomorrow with retail sales scheduled for release. USD/CAD has been trending higher for the past few days, hitting 1.2685 in the process. Although it failed to extend its gains to 1.27, that target could be breached if retail sales turn negative. Economists are looking for zero growth but according to the wholesale sales, demand weakened significantly towards the end of the year. Like the Eurozone, Canada’s economy isn’t doing terrible but the strength that we saw for most of 2017 began to fade towards the end of the year. Softer retail sales would take USD/CAD to its next resistance level of 1.2725 (the 200-day SMA). Beyond that, the next stop should be the 50-week SMA near 1.2840. If USD/CAD rejects 1.27 or the 200-day SMA, a pullback should take the pair below 1.26.

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