The Canadian dollar is in red territory, with the North American markets yet to open. Currently, USD/CAD is trading at 1.2758, up 0.32% on the day.
US retail sales, jobless claims disappoint
The US economy is struggling, and this grim fact was reiterated over the past two days, as key releases were much softer than expected. Retail sales, the primary gauge of consumer spending, were a big disappointment. Headline retail sales fell by 1.1% and the core reading declined by 0.9%. Both readings were much lower than the street consensus. This was followed by jobless claims, which have now risen in four of the past five weeks. The reading of 885 thousand was much higher than the estimate of 853 thousand, and the highest level since October.
Later today, it is Canada’s turn to release retail sales for October. Much like the US numbers, economists are expecting a sharp slowdown in the upcoming numbers, with a forecast of just 0.1% for both the headline and core readings. In September, the readings were 1.1% and 1.0%, respectively.
Despite the weak economy, the Federal Reserve is sound optimistic about future economic conditions. At the FOMC meeting, the last meeting in 2020, the Fed revised GDP forecasts higher and unemployment lower. The markets were in suspense as to whether the Fed would tinker with QE or remain on the sidelines. In the end, policymakers decided against any new stimulus measures. While the central bank did commit to bond purchases for a longer duration, which does represent an easing of sorts, it didn’t make any changes to the amount of QE, despite the resurgence of Covid-19 which has hit the US. This has given the US dollar some breathing room, as additional easing would have likely sent the greenback to lower levels.
- In the Asian session, USD/CAD broke above resistance at 1.2753. The next resistance lines are at 1.2783 and 1.2815
- There is support at 1.2691, followed by a support line at 1.2659
- USD/CAD is testing the 10-day MA line for the first time since November 23rd
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