USD/CAD – Loonie Swoons to 7-Week Low After Dismal Canadian Retail Sales

After a rough week, the Canadian dollar is almost unchanged in the Monday session. Currently, USD/CAD is trading at 1.2634, up 0.04% on the day. On the release front, it’s a quiet start to the week, with no major US events until Wednesday. Later in the day, Canada releases Wholesale Sales, which is expected to slow to 1.1 percent.

The Canadian dollar lost 1.3% last week against the greenback, and is currently at its lowest level since August 31. USD/CAD gained ground on Friday, as Canadian Core Retail Sales slumped with a decline of 0.7% in August. This marked the indicator’s steepest decline since June 2016. Inflation remains weak, as Canadian CPI inched up to 0.2%, shy of the estimate of 0.3%. These numbers have bolstered the likelihood that the Bank of Canada will sit on its hands at its policy meeting next week. The odds that interest rates will stay the same have increased to 81%, up from 73% prior to the core retail sales and CPI data. Canada’s economy has slowed down after an excellent first half of 2017. Strong economic growth and an increase in exports prompted the BoC to respond with a rate hike in September.

The markets are keeping a close eye on the Federal Reserve, as President Trump has said he will nominate a new Fed head shortly. The front runners are economist John Taylor and Federal Reserve Governor Jerome Powell. Taylor advocates a rule in which rates which be as high as 3 percent, given current economic conditions. Powell is more closely aligned to Fed Chair Janet Yellen’s monetary stance which advocates an incremental increase in rates. With the two candidates representing sharply differing views on interest rate levels, Trump’s choice for the new Fed chair could have a significant effect on monetary policy and the strength of the US dollar.

USD/CAD Fundamentals

Monday (October 23)

  • 8:30 Canadian Wholesale Sales.  Estimate 1.1%

*All release times are GMT

*Key events are in bold

USD/CAD for Monday, October 23, 2017

USD/CAD Monday, October 23 at 7:40 EDT

Open: 1.2626 High: 1.2641 Low: 1.2613 Close: 1.2631

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2302 1.2459 1.2598 1.2701 1.2778 1.2943

USD/CAD is showing limited movement in the Asian and European sessions

  • 1.2598 is providing support
  • 1.2701 is the next resistance line
  • Current range: 1.2598 to 1.2701

Further levels in both directions:

  • Below: 1.2598, 1.2459, 1.2302 and 1.2218
  • Above: 1.2701, 1.2778 and 1.2943

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Monday session. Currently, long positions have a majority (60%), indicative of trader bias towards USD/CAD breaking out and moving to higher ground.

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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.