USD/CAD – Loonie Improves on Strong Canadian Retail Sales Numbers

The Canadian dollar has been quietly chipping away and gaining ground against its US counterpart since last week. This trend continued on Tuesday, as USD/CAD dropped below the 1.03 level in the North American session. The catalyst for the Canadian dollar was very strong Canadian Retail Sales and Core Retail Sales data, as both releases posted sharp gains and crushed their estimates. In the US, it was a different story as HPI missed its estimate, while the Richmond Manufacturing Index looked awful, dropping to a six-month low.

The Canadian dollar has managed to hold its own against the US dollar recently, and got a boost on Tuesday as Canadian retail sales numbers were excellent. Core Retail Sales, a key release and market-mover, jumped 1.2%. The red-hot figure shocked the markets, which had expected a negligible gain of 1.2%. Retail Sales kept pace, climbing 1.9%, which blew past the estimate of 0.4%. Both indicators recorded their highest levels since May 2010. The Canadian dollar improved on the news, as USD/CAD dropped below the 1.03 line for the first time since late-June. South of the border, US HPI posted a second straight gain of 0.7%, short of the estimate of 0.9%. The Richmond Manufacturing Index looked awful, plunging from +8 points to -11 points, its worst showing since January. The estimate stood at +7 points.

The G20 wrapped up a meeting of finance ministers and central bankers over the weekend in Moscow. Monetary policy was high on the agenda, as the delegates released a statement that future monetary policy moves would be “carefully calibrated and clearly communicated”. This is in response to the recent market turmoil which followed after statements out of the Federal Reserve with regard to QE tapering. The Fed has not always sounded consistent regarding its QE intentions, and predictably, the resulting uncertainty led to all sorts of speculation and rocked the markets. Last week in Washington, US Fed chair Bernard Bernanke was careful not to mention any specific timelines for scaling down QE, and it’s likely that Bernanke will continue to keep his cards close to his chest, leaving the markets guessing as to when the Fed might pull the trigger and downsize QE.

USD/CAD for Tuesday, July 23, 2013

USD/CAD 1.0292 H: 1.0319 L: 1.0287

USD/CAD Technical

USD/CAD has dropped below the 1.03 line in Tuesday trading as the Canadian dollar continues to post gains. The pair is facing resistance at 1.0337. This is followed by a resistance line at 1.0442. On the downside, the pair is putting strong pressure on 1.0282. This line could break if the loonie can continue its upward momentum. This is followed by a support level at 1.0229.

• Current range: 1.0282 to 1.0337

Further levels in both directions:

• Below: 1.0282, 1.0229, 1.0157 and 1.01
• Above: 1.0337, 1.0442, 1.0502, 1.0573, 1.0652 and 1.0705

OANDA’s Open Positions Ratio

USD/CAD ratio remains almost unchanged in Tuesday trading, continuing a trend which started on Monday. This is not reflected in the pair’s current movement, as the Canadian dollar has posted gains against the greenback. Long positions enjoy a slight majority, indicating a slight bias towards the US dollar moving higher.

The Canadian dollar continues to improve, slowly but steadily, against the US dollar. Will the upward trend continue? Tuesday’s Canadian retail sales releases helped the loonie break through the 1.03 line, and we could see USD/CAD stay close to this level during the day.

USD/CAD Fundamentals

• 12:30 Canadian Core Retail Sales. Estimate 0.1%. Actual 1.2%.
• 12:30 Canadian Retail Sales. Estimate 0.14. Actual 1.9%.
• 13:00 US HPI. Estimate 0.9%. Actual 0.7%
• 14:00 US Richmond Manufacturing Index. Estimate 7 points. Actual 11 points.

*Key releases are highlighted in bold

*All release times are GMT

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