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Canada Retail Sales grew insignificantly

Market Analysis

USDCAD, M30

Canada retail sales grew only 0.1% in September after a revised 0.1% drop (was -0.3%) in August. The ex-auto retails sales aggregate improved 0.3% following a 0.4% drop (was -0.7%). The gain in total sales and the ex-autos sales aggregate fell well short of expectations. Sales volumes fell 0.6% in September. This is disappointing report vaulted upwards USDCAD. 

The USDCAD perked up by 50 pips higher, up to 1.2725  high, since settling around 1.2712-15. Thin conditions, with the U.S. out, have exacerbated the magnitude of movement. USDCAD had earlier clocked a 10-day low at 1.2672, amid broader weakness in the U.S. dollar. The data accompanies recent BoC policymaker guidance emphasizing that there is no rush to continue with its gradual tightening cycle, though with the U.S. dollar under broad pressure there may be limited potential for USDCAD to sustain upside direction.

In the 30 Minutes chart, momentum indicators are turning lower again, after positive configuration on data announcement. However Dollar weakness seen since yesterday, helps loonie gaining ground against US dollar despite the weak data.  The short-term  RSI and Stochastic look oversold, pushing below 80. In higher time-frames such as hourly and 4-hourly ones, momentum indicators confirm that downside momentum is still strong, with RSI and Stochastics below neutral and MACD being negative since Tuesday.

Despite the strong positive candle posted on data release, the pair turned lower after testing a resistance at 23.6 Fibonacci level since September at 1.2725. Hence price action along with the USD weakness and with the acceleration lower of momentum indicators, suggest intra day bearish movement, towards support levels at at 1.2670-80.

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Andria Pichidi

Market Analyst

HotForex

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