The big event risk out of Canada this week was the Bank of Canada's Surprise rate cut to 0.75% from 1.00%. The bank cited inflation concerns and lowered its growth projection, but expects things to rebound in the second of 2015 into 2016 due to the weak currency rate and the recovery in the US (Canada's largest trading partner). Today, we got inflation and retail sales data out of Canada.CAN CPI m/m (Dec.): -0.7%; forecast: -0.5%; previous: 0.4%Core CPI m/m (Dec.): -0.3%; forecast: -0.5%; previous: -0.2%CAN Retail Sales (Dec.): 0.4%; forecast: -0.6%; previous: 1.6%Core Retail Sales (Dec.): -0.7%; forecast: 0.5%; previous: 0.1%This data was mixed, with better than expected retail sales data, and lower than expected inflation data. But, I would say that the inflation data is more important at this point. The BoC's surprise rate cut was reasonable after all as it expected dismal inflation reading, and it was even worse. So, we should see the CAD pressured.USD/CAD 1H Chart (click to enlarge)The 1H chart shows that USD/CAD was already extending a sharp rally that followed the BoC announcement. It looks like it needs a breath and price action became choppier yesterday (1/22). Today, after the inflation and retail sales data, USD/CAD actually retreated from 1.2450. But we should limit any bearish outlook on the USD/CAD. In the short-term, 1.2350 appears to be key support. Below that, we should limit any short-term correction to 1.22. To the upside USD/CAD has room to run:USD/CAD Monthly Chart (click to enlarge) The monthly chart shows that price is now pushing above the 200-month SMA and the RSI is overbought. We see key resistance starting around 1.2730, a previous resistance pivot in 2005 (2005-high), and a common resistance area in 2008-2009. The high in 2008-2009 stretched to 1.3060. We should look for resistance there, with downside risk to 1.22, and limited to 1.20 (using the 2008-2009 turn-of-the-year price action as a guide).