USD/CAD – Canadian Dollar Heads Higher as US Retail Sales, PPI Slip

The Canadian dollar has posted slight gains on Friday, as the currency continues this week’s impressive rally. In the North American session, USD/CAD is trading at 1.2950. On the release front, it’s been a very busy day in the US, a sharp contrast to what has been an uneventful week. US numbers have looked dismal, as retail sales and PPI reports all missed their estimates. UoM Consumer Sentiment improved to 90.4 points, but this was short of expectations.

US releases have wrapped up the week on a sour note. Core Retail Sales dropped 0.3%, while Retail Sales slipped to a flat 0.0%. There was no relief from PPI readings, which measure wholesale prices. PPI came in at -0.4%, and Core PPI declined 0.3%. All four releases missed expectations and were lower than their previous readings. The PPI readings point to ongoing low inflation levels, well below the Federal Reserve’s target of about 2.0%. The Fed next meets in September to decide whether to raise interest rates. A soft GDP report last month had dampened expectations about a rate hike before 2017, but sharp employment numbers, led by a stellar NFP report, had raised the odds of a September hike. However, Friday’s soft numbers will dampen enthusiasm about a rate hike in September, so the Fed may opt to stay on the sidelines until December or even later.

The Canadian dollar has jumped 240 points this week as USD/CAD has dropped below the 1.30 level. The Canadian currency is trading at 3-week highs, benefiting over concerns about a tighter oil market.  Crude has jumped 4.2% on Thursday, after the well-respected IEA stated that oil supplies will decrease in the third quarter, despite record pumping levels from OPEC in July. The IEA added that although oil prices have dropped recently, its balances do not show an oversupply in the second of 2016, and that it expects demand to increase in the third quarter. According to Phil Flynn, senior energy analyst at Price Futures Group, $40 level is a key support line and prices are expected to trade within a range for several weeks. As well, OPEC members are planning to meet in Algiers in late September, and if an agreement to curb prices is reached, supplies would be reduced and crude prices would move upwards.

USD/CAD Fundamentals

Friday (August 12)

• 8:30 US Core Retail Sales. Estimate 0.2%. Actual -0.3%
• 8:30 US PPI. Estimate 0.1%. Actual -0.4%
• 8:30 US Retail Sales. Estimate 0.4%. Actual 0.0%
• 8:30 US Core PPI. Estimate 0.2%. Actual -0.3%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 91.5. Actual 90.4
• 10:00 US Business Inventories. Estimate 0.1%. Actual 0.2%
• 10:00 US Preliminary UoM Inflation Expectations. Actual 2.5%

* Key releases are in bold

*All release times are GMT

USD/CAD for Friday, August 12, 2016

USD/CAD August 12 at 10:20 GMT

Open: 1.2987 High: 1.2993 Low: 1.2925 Close: 1.2943

USD/CAD Technical

• USD/CAD was flat in the Asian and European sessions. The pair has posted slight losses in North American trade
•  There is resistance at 1.2990
• 1.2900 is a weak support line. It could be tested in the North American session

Further levels in both directions:

• Below: 1.2900, 1.2780 and 1.2653
• Above: 1.2990, 1.3081, 1.3219 and 1.3353
• Current range: 1.2900 to 1.2990

OANDA’s Open Positions Ratio

In the USD/CAD ratio, short positions have a majority (54%), indicative of trader bias towards USD/CAD continuing to move to lower levels.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.