Canadian dollar breaks below 1.31 line

The Canadian dollar has started the new trading week with gains. Currently, the pair is trading at 1.3067, down 0.39% on the day. Today’s economic data is limited to tier-2 events. Canada Manufacturing Sales rebounded with a gain of 1.5% in September, after a reading of -2.0% beforehand. However, the figure fell short of the forecast of 1.7%. Over in the US, the Empire State Manufacturing Index continues to lose ground. The index fell to 6.3 in November, down from 10.5 in the previous release. The reading pointed to slight expansion but was well short of the estimate of 13.8 points.

US Retail sales ahead

On Tuesday, the US releases retail sales for October, one of the first key events of the fourth quarter. The headline reading is projected to slow to 0.5%, after a strong gain of 1.9% in September. A similar trend is expected from Core Retail Sales, which is forecast to slow from 1.5% to 0.6%. The “cup half full” argument is that retail sales continue to expand, albeit at a tempered pace. With US consumers largely unable to travel and make use of other services due to Covid, consumer spending has shifted to goods, which has boosted retail sales. At the same time, however, the normally robust Christmas shopping season could be weaker than usual if consumers scale back spending because of difficult economic conditions.

Another sign that the US consumer is concerned about the economy came on Friday, as UoM Consumer Sentiment slowed to 77.0 in October in November, shy of the forecast of 82.1 points. The index fell from 81.8, marking its first decline in four months. On a negative note, the survey found that Joe Biden’s election victory did not make consumers feel more optimistic about the economy.

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USD/CAD Technical

• USD/CAD tested support at 1.3085 in the European session. The next support level is at the 1.3055
• There is resistance at 1.3167, followed by resistance at 1.3197
• On Friday, the pair tested the 20-day MA line but then retracted

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