USD/CAD – Canadian Dollar Slips as Canadian Retail Sales Slides

USD/CAD has posted slight gains in the Wednesday session. Early in North American trade, the pair is trading slightly below the 1.32 line. On the release front, Canadian retail sales reports were softer than expected. The US will release Existing Home Sales and the Federal Reserve will publish the minutes of the January policy meeting. On Thursday, the US releases unemployment claims, with an estimate of 242 thousand.

Canadian consumers are in a surly mood and cut back in spending in December, to the surprise of the markets. Core Retail Sales declined 0.3%, compared to a forecast of +0.8%, while Retail Sales dropped 0.5%, missing the forecast of +0.1%. The week wraps up with Canadian CPI, which has posted two straight declines, as inflation levels remain weak. However, the markets are expecting a 0.3% gain in the January report. The weak numbers have further weakened the Canadian dollar, which is trading at 2-weeks lows against its US counterpart.

The Federal Reserve is back in the spotlight on Wednesday. The central bank finally pressed the rate trigger in December, a full year after the previous rate hike. Last week, Fed Chair Janet Yellen strongly hinted that that another hike is on the way, leaving the markets to speculate on the timing of a hike – will it be in March or June? Even though the US economy is solid and we could see several rate hikes in 2017, market uneasiness over the Trump administration continues to grow, dampening investor appetite for risk. Trump continues to have difficulty filling in key cabinet positions and the media continues to probe connections between Trump officials and Russia. Trump is yet to outline a clear and coherent economic policy, although he has promised to unveil a tax package in the next few weeks. After Trump’s shock win in November, post-election euphoria boosted the markets. However, Trump’s first month in office has been marked by controversy and confusion, which has unsettled the markets.

USD/CAD Fundamentals

Wednesday (February 22)

• 8:30 Canadian Core Retail Sales. Estimate 0.8%. Actual -0.3%
• 8:30 Canadian Retail Sales. Estimate 0.1%. Actual -0.5%
• 10:00 US Existing Home Sales. Estimate 5.55M
• 13:00 US FOMC Member Jerome Powell Speech
• 14:00 US FOMC Meeting Minutes

Thursday (February 23)

• 8:30 US Unemployment Claims. Estimate 242K
• 11:00 US Crude Oil Inventories

*All release times are GMT

*Key events are in bold

USD/CAD for Wednesday, February 22, 2017

USD/CAD February 22 at 8:40 EST

Open: 1.3146 High: 1.3177 Low: 1.3107 Close: 1.3166

USD/CAD Technical

• USD/CAD was flat in the Asian session and has posted gains in European trade
• 1.3120 was tested in support earlier and remains a weak line
• 1.3253 is the next line of resistance

Further levels in both directions:

• Below: 1.3120, 1.3003, 1.2922 and 1.2815
• Above: 1.3253, 1.3371 and 1.3461
• Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

USD/CAD ratio continues to show gains in short positions this week. Currently, long positions have a slight majority (53%), indicative of trader bias towards USD/CAD continuing to move higher.

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