USD/CAD – Canadian Dollar Drops As Retail Sales Falter

The Canadian dollar continues to lose ground against its US counterpart. USD/CAD has pushed above the 1.05 line early in Thursday’s North American session. The Canadian dollar has lost close to two cents against the broadly-stronger greenback so far this week. In economic news, Canadian retail sales releases were sluggish. US Unemployment Claims didn’t look sharp either, with the key indicator coming in above the estimate.

The Canadian economy continues to struggle, and Thursday’s retail sales releases brought no relief. Core Retail Sales dropped from 1.2% last month to -0.8% in the August release. This was well short of the estimate of 0.1% and the weakest reading since February. Retail Sales fared no better, declining from 1.9% to -0.6%. The estimate stood at -0.3%. These weak figures come on the heels of Wholesale Sales, which posted a sharp decline. Clearly, consumer spending is showing weakness and this is bad news for the Canadian economy.

There has been a lot of speculation about when the Federal Reserve will taper its QE program, and the markets were hopeful that the release on Wednesday of the FOMC minutes of its most recent policy meeting would shed some light on the Fed’s plans. The minutes didn’t contain any dramatic news, but the US dollar was broadly stronger after their release. Fed officials were described as “broadly comfortable” with plans to taper QE, but remain split on the timing of such a move. The policymakers noted that recent US economic data was “mixed” and all members agreed that it was still too early to scale back the current QE program, under which the Fed purchases $85 billion in assets each month. The markets are anticipating that the Fed will make a move in the near future, and traders should be prepared for a scaling back of QE as early as September.

USD/CAD for Thursday, August 22, 2013

USD/CAD 1.0509 H: 1.0516 L: 1.0472

USD/CAD Technical

USD/CAD continues to move higher in Thursday trading. The pair climbed to the 1.05 line in the Asian session but was unable to cross this line until the North American session. USD/CAD is testing resistance at 1.0573.  This is followed by resistance at 1.0652. This line has held firm since October 2011.

On the downside, the pair is testing support at 1.0502. This line could break if the Canadian dollar shows any signs of recovery. This is followed by support at 1.0442.

• Current range: 1.0502 to 1.0573

Further levels in both directions:

• Below: 1.0502, 1.0442, 1.0337 and 1.0282
• Above 1.0573, 1.0652, 1.0758 and 1.0888

OANDA’s Open Positions Ratio

Looking at the USD/CAD ratio, short positions continue to comprise a majority of the positions. This indicates trader bias in favor of the Canadian dollar recovering and moving to higher ground.

USD/CAD continues to move higher and has pushed above the 1.05 line. With weak Canadian numbers and strong US data on Thursday, we could see more gains for the US dollar during the day.

USD/CAD Fundamentals

• 12:30 Canadian Core Retail Sales. Estimate 0.1%. Actual -0.8%.
• 12:30  Canadian Retail Sales. Estimate -0.3%. Actual -0.6%.
• 12:30 US Unemployment Claims. Estimate 329K.  Actual 336K.
• 13:00 US Flash Manufacturing PMI. Estimate 54.1 points. Actual 53.9 points.
• 13:00 US HPI. Estimate 0.6%. Actual 0.7%.
• 14:00 US CB Leading Index. Estimate 0.5%. Actual 0.6%.
• 14:30 US Natural Gas Storage. Estimate 68B.
• Day 1 – Jackson Hole Symposium.
• 19:15 US Treasury Secretary Jack Lew Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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