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USD/CAD – Rally stalls again after weaker US retail sales data

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  • US retail sales below expectations at -0.8% in January
  • November and December also revised lower
  • USDCAD falls after briefly breaching resistance

There was a big data drop from the US ahead of the opening bell on Wall Street today, with one report in particular getting people’s attention.

The retail sales data for January were poor. Not only that, they were much poorer than already low expectations. And to make matters worse, they were accompanied by downward revisions to the data for November and December.

The good news is that the sales figures in the second half of last year were very strong so it was never likely to be sustainable. And at a time when people are becoming worried that a strong economy and consumer could derail rate-cutting plans, the data may have come at a good time.

While the plunge in January and revisions may signal the consumer is not in as healthy a position as previously imagined, it probably doesn’t indicate the start of a significant slowdown in spending. Perhaps it’s more a case of households being too exuberant around the festive period.

New year recovery running out of steam?

The greenback has slipped against the Canadian dollar once more on the back of the data which makes the move on Tuesday look less significant than it may have first appeared.

USDCAD Daily

Source – OANDA

A move below last week’s low could reinforce this further and perhaps suggest the retracement has run its course. The key test above now remains the 61.8% Fibonacci retracement level which coincides with support from early November and resistance from late November and early December.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
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