Canadian Dollar surges as sharp US Retail Sales miss hits the Dollar

• The Canadian Dollar is among Friday's top performers, pushing USD/CAD to a fresh two-month low near 1.3860.
• US Retail Sales fell 0.6% in July against forecasts for a small gain, weighing broadly on the Greenback.
• DXY falls to a weekly low after the downbeat data release.

The Canadian Dollar (CAD) is among the best performers on Friday, trading near a fresh two-month low against the US Dollar (USD) near the 1.3860s mark. The move coincides with a weak US Retail Sales report that pulled the Greenback lower across the board, but it preceded that data release.

Retail Sales fell 0.6% in July, well short of the 0.1% gain markets expected and down from a 0.2% rise the month before. The Control Group, which feeds into GDP, fell 0.4% compared with a 0.4% revised gain the month prior. The numbers point to a US consumer pulling back, and they land as one of the year's softer readings.

The US Dollar lost ground after the release with the Dollar Index (DXY) sliding close to the 99.50s. This weak print adds to the case for the Federal Reserve (Fed) to hold interest rates unchanged rather than hiking, and traders leaned that way straight after the data. With the Greenback on the back foot, USD/CAD had little to hold it up.

Short-term technical analysis:

On the 4-hour chart, USD/CAD trades at 1.3870, retaining a bearish near-term bias as it holds below both the 20-period Simple Moving Average (SMA) at 1.3925 and the 100-period SMA at 1.4019. The pair has slipped into oversold territory, with the Relative Strength Index (RSI) around 25, which hints at stretched downside conditions but does not yet challenge the prevailing downside structure defined by the clustered overhead levels.

On the topside, immediate resistance is seen at 1.3884, followed closely by 1.3894, forming a nearby barrier ahead of the horizontal cap at 1.3922 and the 20-period SMA at 1.3925. Higher up, the 100-period SMA at 1.4019 reinforces a broader resistance band that would need to be reclaimed to ease bearish pressure. On the downside, initial support is located at 1.3864; a sustained break below this floor would expose further weakness in the trend despite the oversold reading.

(The technical analysis of this story was written with the help of an AI tool. Know more.)