A Sharp Reversal for USDCAD

USDCAD, H1

Canada retail sales fell 0.9% in November after the 0.2% gain in October (revised from +0.3%). The ex-autos sales aggregate contracted 0.6% in November after a 0.2% decline in October (revised from 0.0%). The total and ex-autos sales declines outpaced expectations, and were driven by a 5.0% drop in gasoline station sales (due to lower prices) and a 1.8% loss for motor vehicle and parts dealers. Retail sales volumes fell 0.4% in November, joining the 0.9% decline in manufacturing sales volumes and a 1.2% fall in wholesale shipment volumes.

Meanwhile, BoC’s Poloz sees the economy in “good shape” even though the bank is dealing with low oil prices and risks to the global trading system, according to a Bloomberg TV interview. He acknowledged that oil prices were very weak in Q4 and this has provided a “material shock” to the outlook for the Canadian economy, though if trade tensions were resolved that could boost the economy. He reiterated that the pace of future interest rate hikes in Canada will be data dependent, though as to the data – the US shutdown hit the Canada trade report, so it can’t fully show the impact of trade tensions on exports.

USDCAD rallied over 1.3340 from 1.3305 following the weaker Canada retail sales outcome. The pairing had slipped from overnight highs over 1.3360. A sharp reversal indeed. The H1 EMA Strategy would have triggered overnight and reached T1 earlier today and T2 would not have been reached before the reversal triggered at 16:00. The daily pivot and 20-period moving average is now initial Support at 1.3335 with Resistance now at the overnight high around 1.3360.