USD/CAD – Steady After Mixed Canadian Retail Sales Data

USD/CAD has edged slightly higher, as the pair was trading in the 0.9930 range. The pair has not shown much volatility, but the US dollar has been chipping away, making slow but steady progress against the Canadian currency. In Canada, Core Retail Sales slumped, while Retail Sales beat the forecast. Today’s key US release is Existing Home Sales.

There were a pair of Canadian releases on Tuesday, and the results were a mixed bag. Retail Sales fell sharply, from 0.7% to 0.2%. However, this was better than the estimate of 0.0%. Core Retail Sales was a major disappointment, as the key indicator declined by 0.3%. This was well below the estimate of 0.1%, and marked the consumer indicator’s worst outing since August 2012. Core Retail Sales is considered the more reliable indicator of the two, since it excludes automobile sales, which tend to be volatile, and thus distort the prevailing trend. In the US, the markets return to action after a long weekend. The markets will be watching today’s Existing Home Sales release. This key housing indicator has been on the upswing in recent months, and the forecast calls for further improvement. The other US release is the Richmond Manufacturing Index. After two disappointing manufacturing releases last week, another poor reading could raise alarm bells about the health of the US manufacturing sector.

In Washington, there was a new development in budget negotiations, which have been stalled due to sharp disagreements between the Republicans and Democrats. The Republicans have announced that they will table a proposal in Congress which would extend the debt ceiling until April 15. This would allow the U.S. government to borrow enough money to keep it fully operating for the next three months until the sides can reach an agreement. The two sides took a short breather to celebrate President Obama’s inauguration on Monday. With the parties far apart on the issue of spending cuts and how to deal with the staggering US debt, we can expect more fireworks on Capitol Hill before the spring thaw.

In Japan, the Bank of Japan changed its inflation stance, increasing its inflation target from 1% to 2%. This is in line with the Japanese government’s target. Prime Minister Abe has been vocal about combating deflation, and has been putting strong pressure on the BOJ to change its inflation target. The central bank also announced an open-ended commitment to buy assets under its asset-buying and lending scheme. However, the program will not begin until January 2014. The markets are hoping that these steps will kick-start the anemic Japanese economy. Market sentiment was up following the BOJ announcement, and developments in Japan could have an important impact on USD/CAD.

USD/CAD for Tuesday, Jan 22, 2013

USD/CAD January 22 at 14:00 GMT

0.9931 H: 0.9946 L: 0.9910

USD/CAD is not showing strong movement, as the pair trades in the 0.9930 range. There is weak resistance at 0.9943. This is followedby the important parity level. On the downside, 0.9909 is providing support. This is also a weak line, and could face activity if the US dollar retracts. There is stronger support at 0.9845.

Current range: 0.9909 to 0.9943.

Further levels in both directions:

Below: 0.9909, 0.9845, 0.9809, 0.9767, 0.9625 and 0.9526.

Above: 0.9943, 1.0003, 1.0041, 1.0157, 1.0207, 1.0286.

OANDA’s Open Position Ratios

After some movement on Monday, the USD/CAD ratio has shown little change. This is reflected in the subdued activity we are seeing from the pair. If USD/CAD continues to drift, we can expect more of the same in the ratio.

The US dollar has made steady progress against the Candian currency, although the pair has tapered off in Tuesday trading. Will the upward trend resume? The pair is not far from the all-important parity line. With key releases out of both Canada and the US on Tuesday, we could see some movement from USD/CAD once the markets have had a chance to analyze the data.

USD/CAD Fundamentals

• 13:30 Canadian Core Retail Sales. Estimate 0.1%. Actual -0.3%.
• 13:30 Canadian Retail Sales. Estimate 0.0%. Actual 0.2%.
• 15:00 US Existing Home Sales. Estimate 5.09M.
• 15:00 US Richmond Manufacturing Index. Estimate 4 points.

*Key releases are highlighted in bold

*All release times are GMT

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.