This week has been a quiet one for the Canadian dollar, as the USD/CAD trades close to the 1.32 level. On Friday, USD/CAD is trading at 1.3186, up 0.16% on the day.
Canadian retail sales drop off sharply
Earlier in the week, US retail sales in August slowed significantly, and it was Canada’s turn on Friday, as the July data was released. Headline retail sales dropped to 0.6%, down sharply from 23.7% beforehand. The core reading was even weaker, with a decline of 0.4%, down from 15.7% a month earlier. Despite the softness in the retail sales numbers, investors were in a forgiving mood and did not punish the Canadian dollar. The Canadian economy appears headed in a V-shaped recovery and the Canadian currency has looked strong in recent months, although the US dollar has finally stopped the bleeding, as USD/CAD is up 1.0% in the month of September.
The Canadian dollar has managed to hold its own despite soft Canadian data earlier in the week. Consumer inflation decreased by 0.1% in August, its first decline in four months. On Thursday, ADP Nonfarm Payrolls collapsed, with a dismal reading of -205.4 thousand in July. Each of the previous two releases showed that the economy gained over one million jobs, in what was a jarring drop. Investors may have given the Canadian dollar a pass this week, but if upcoming key numbers continue to point downwards, sentiment towards the Canadian currency could falter in a hurry.
- There is weak resistance at 1.3224, followed by resistance at 1.3284
- 1.3127 is the first line of support. Below, there is support at 1.3090, just below the 1.31 level
- USD/CAD continues to put downward pressure on the 20-day MA. If the pair breaks below this line, it would signal a downward trend