Yuri Papshev
Independent Analyst
Published on Tuesday, the US Department of Commerce data exceeded market expectations. Compared to May, retail sales in June increased by 0.4% and 3.4% (in annual terms). The forecast assumed an increase of 0.1%. In April and May, sales rose 0.4%. This growth has been going on for four months in a row and indicates consumer confidence in the country's economy.
Consumer spending is the main source of growth for the US economy, as they account for two thirds of GDP.
After the release of new data on retail sales, the prospects for a drastic reduction in interest rates have weakened. All three key reports issued after the June meeting of the Federal Open Market Committee for the Fed, namely, reports on employment, consumer prices and retail sales, were very strong.
Market participants still take into account the rate cut at the Fed meeting on July 30 - 31. However, the probability of lowering interest rates by 50 basis points has decreased, and lowering the rate by 25 or 10 basis points, which would be appropriate after Powell’s statements, is already taken into account in the dollar quotes.
Thus, the space for a further fall in the dollar has decreased. Also take into account the propensity of other central banks to soften policies.
From the news for today, which could significantly increase the volatility in the foreign exchange market, we are waiting for the publication (at 12:30 GMT) of data on Canada.
As expected, the core consumer price index (Core CPI) rose in June by 0.1% (+ 2.6% in annual terms). This is positive data that will strengthen CAD when confirming the forecast. Conversely, weak values and indexes worse than forecast will have a negative impact on CAD. Data worse than the forecast can be a driver for the corrective growth of the pair USD/CAD.
The signal for the resumption of long positions will be the breakdown of the short-term resistance level of 1.3071 (ЕМА200 on the 1-hour chart). The growth target in the upward correction is resistance levels of 1.3185 (ЕМА200 on the 4-hour chart), 1.3250 (ЕМА200 on the daily chart).
In the event of a breakdown of the resistance level, 1.3250 USD/CAD will head towards the resistance levels of 1.3520 (2019 highs), 1.3660 (2018 highs), 1.3790 (2017 highs), which will indicate a full recovery of the bullish trend.
Breakdown of the local support level of 1.3045 will direct USD/CAD towards the lower boundary of the downward channel on the daily chart and at 1.2975.
Support Levels: 1.3045, 1.3015, 1.2975, 1.2850, 1.2740
Resistance Levels: 1.3071, 1.3140, 1.3185, 1.3250, 1.3435, 1.3452, 1.3465, 1.3520, 1.3600, 1.3660, 1.3790
Trading Recommendations
Sell Stop 1.3035. Stop Loss 1.3110. Take-Profit 1.3015, 1.2975, 1.2850, 1.2740
Buy Stop 1.3110. Stop Loss 1.3035. Take-Profit 1.3140, 1.3185, 1.3250, 1.3435, 1.3452, 1.3465, 1.3520, 1.3600, 1.3660, 1.3790
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