USD/CAD – Volatile on Retail Sales, BOC Statement

The Canadian dollar is showing some volatility in Wednesday’s North American session, as USD/CAD trades at the 1.12 line. It’s been a busy day on the release front. Canadian Retail Sales posted a decline of 0.3%, and the Bank of Canada maintained rates at 1.0%. Later in the day, the BOC hosts a press conference and Governor Stephen Poloz testifies before  House of Commons Standing Committee on Finance in Ottawa. In the US, Core CPI and CPI met expectations, as both indicators posted a small gain of 0.1%.

Canadian Retail Sales, the primary gauge of consumer spending, looked weak in September, posting a decline of 0.3%. This marked a second straight decline and was the weakest showing since January. The markets had anticipated a gain of 0.1%. Retail Sales also came in at -0.3%, shy of the estimate of +0.1%. The markets then shifted their attention to the BOC, which maintained rates at 1.0%, as expected. However, the central bank did remove the word “neutral” from its statement, which was used in the September statement with regard to the BOC’s stance on a rate hike. This helped the loonie recover from sharp losses sustained after the soft Retail Sales Report.

US numbers have generally been strong, but very low inflation levels continue to point to slack in the economy. On Wednesday, this trend continued with soft consumer inflation numbers. CPI rose to +0.1%, an improvement from the previous reading of -0.2%. The estimate stood at 0.0%, so the markets clearly did not have high expectations. It was a similar story from Core CPI, which also posted a gain of 0.1%, up from 0.0% a month earlier. This was shy of the forecast of 0.2% but still within expectations.

USD/CAD for Wednesday, October 22, 2014

USD/CAD October 22 at 15:05 GMT

USD/CAD 1.1208 H: 1.1292 L: 1.1184

USD/CAD Technical

• USD/CAD was uneventful in the Asian and European sessions. The pair has showed strong movement in North American trading, breaking above resistance at 1.1278 but then retracting sharply.
• 1.1124 continues to provide strong support.
• 1.1278 was breached earlier in the day but recovered. 1.1414 is next.
• Current range: 1.1124 to 1.1278

Further levels in both directions:

• Below: 1.1124, 1.1004, 1.0961 and 1.0865
• Above: 1.1278, 1.1414, 1.1493 and 1.1669

OANDA’s Open Positions Ratio

USD/CAD ratio has posted gains in long positions on Wednesday, continuing the trend we’ve seen all week. This is not consistent with the pair’s movement, as the Canadian dollar has posted gains. The ratio has a majority of short positions, indicating trader bias towards the Canadian dollar continuing to gain ground.

USD/CAD Fundamentals

• 12:30 Canadian Core Retail Sales. Estimate +0.2%. Actual -0.3%.
• 12:30 Canadian Retail Sales. Estimate +0.1%. Actual -0.3%.
• 12:30 US CPI. Estimate 0.0%. Actual 0.1%.
• 12:30 US Core CPI. Estimate 0.2%. Actual 0.1%.
• 14:00 BOC Monetary Policy Report.
• 14:00 BOC Rate Statement.
• 14:00 BOC Overnight Rate. Estimate 1.00%. Actual 1.00%.
• 14:30 US Crude Oil Inventories. Estimate 2.8M. Actual 7.1M.
• 15:15 BOC Press Conference.
• 19:30 BOC Governor Stephen Poloz testifies before  House of Commons Standing Committee on Finance in Ottawa.

* Key releases are in highlighted bold.

*All release times are GMT

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