Canada goes shopping

Forex 4 minutes to read

Michael O’Neill

FX Trader, Loonieviews.net

Summary: Canadians went on a shopping spree in March and USDCAD dipped on the news before retracing its steps as traders dug into the data.

Statistics Canada said that retail sales increased for the second consecutive month, rising 1.1% to $51.3 billion in March. Sales were higher in seven of 11 subsectors, representing 39% of retail trade. USDCAD dropped from 1.3396 to 1.3359 on the news. Unfortunately, the bulk of the shopping was done at gas pumps and the post data dollar sellers became dollar buyers lifting USDCAD back to 1.3389 (as of 1400 GMT) and unchanged since New York opened.

Nevertheless, the retail sales report was robust and supported the Bank of Canada view that earlier economic weakness was merely a “soft patch,” in part due to weak oil prices. They expect economic growth to pick up in Q2. Today’s data combined with the steady inflation and robust unemployment reports suggest next weeks Bank of Canada monetary policy statement could be a tad hawkish.

The intraday USDCAD technicals are bearish below 1.3410, with the break of support at 1.3370 targeting further losses to 1.3320. However, US/China, US/Iran tensions, Brexit, and EU elections limit USDCAD downside as a stampede into safe-haven trades is only a headline away.

There is a whiff of risk aversion in the air. The Japanese yen and Swiss franc are a tad firmer in New York trading while Theresa May’s latest Brexit plan failure extended GBPUSD losses and made it the worst performing currency since New York opened. US sanctions on more Chinese companies have sparked the latest bout of FX market angst even after Huawei was given a three-month reprieve.

Wall Street gave back a small part of yesterday’s gains in early trading, but the price action is just noise ahead of the release of the May 1, Federal Open Market Committee minutes in a few hours.

usdcad — USDCAD 4-hour. Source: Saxo Bank

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