Top Story

USD/CAD trading around key level amid Canadian data

As the US dollar pulled back on Thursday after its recent rebound from multi-year lows, the Canadian dollar experienced heightened volatility after Canadian retail sales data for December came out on Thursday morning much worse than expected.

The headline retail sales number showed a surprising drop of -0.8% versus expectations of 0.0%, and after the previous month’s +0.3% growth. Even more unexpected was the core retail sales data (excluding automobiles), which showed a sharp drop of -1.8% against expectations of +0.1%, and after the previous month’s +1.7% growth.

As a result of these disappointments, the Canadian dollar tumbled in a knee-jerk reaction, pushing USD/CAD up to new 2-month highs despite US dollar weakness. The Canadian dollar quickly reversed those losses, however, pressuring USD/CAD back down around the key 1.2700 level as the US dollar remained pressured.

Friday morning brings an even more important metric for the Canadian dollar – Canada’s Consumer Price Index (CPI) inflation data for January. Prices of consumer goods and services are expected to have risen by +0.4% in January after a lower-than-expected reading of -0.4% for December. Any higher-than-expected inflation reading on Friday should boost the Canadian dollar, as it would potentially support a more hawkish Bank of Canada. A lower-than-expected reading, in contrast, should have the opposite effect, as it would potentially be a more dovish signal for the central bank.

From a technical perspective, as noted, USD/CAD continues to trade around the key 1.2700 level, having just risen to establish a new 2-month high. This area is also around the important 200-day moving average. In the event that the US dollar regains some of its recent strength while Canadian CPI data comes in lower than expected, USD/CAD would likely break out above the current resistance, which could boost the currency pair towards its next major upside target around the 1.2900 resistance level, which represents the highs of late last year.


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.