USDCAD Forecast: Canadian dollar edges higher ahead of CPI, retail sales

The Canadian dollar is showing slight gains in the Friday session. Currently, USD/CAD is trading at 1.3276, down 0.30% on the day. On the release front, Canada will publish key consumer data. CPI, the primary gauge of consumer spending, is expected to edge up to 0.4%. The markets are expecting mixed signals from retail sales reports. Core retail sales are expected to rebound to 0.5%, but retail sales is forecast to slip to 0.0%. There are no major events in the U.S.

The Canadian dollar is struggling, and June is likely to be the currency’s worst month since February. USD/CAD has gained 2.5% this month, as fears of a global trade war have soured investor appetite for minor currencies like the Canadian dollar. Canada is particularly vulnerable to protectionist moves by the United States, as some 80% of Canadian exports go to the U.S. A tight trading relationship between Canada and the U.S, anchored by the NAFTA agreement, hasn’t prevented President Trump from imposing tariffs on Canadian steel and aluminum. With the NAFTA talks showing little sign of progress, Trump has threatened to impose tariffs of 25 percent on Canadian-built vehicles. Such a move would be disastrous for the Canadian automotive sector, which is worth some C$80 billion to the economy every year. The Trudeau government has promised to help sectors hit with US tariffs, but bailing out the auto industry would cost billions. Canada may have to provide the U.S with more concessions in the NAFTA negotiations, in order to stave off tariffs against Canadian vehicles, which could have a disastrous effect on economic growth.

Central bankers converged in Sintra, Portugal this week, and the trade war between the U.S and its trading partners was high on the agenda. The United States and the EU have slapped tariffs on each other, and President Trump shook up global equity markets when he threatened to impose a 10 percent tariff on some $200 billion worth of Chinese goods. The heads of the central banks from the U.S and the European Union were united in the gloomy view of the trade conflict, with Federal Reserve Chair Jerome Powell saying that the changes in trade policy could force the Fed to “question its outlook”. ECB President Mario Draghi said that the trade spat could have negative consequences on monetary policy. If these protectionist measures force central banks to alter their monetary policy, this could have a significant impact on the currency markets.

All eyes on OPEC

Stocks, EUR rally on data; oil higher ahead of OPEC meet

USD/CAD Fundamentals

• 8:30 Canadian CPI. Estimate 0.4%

• 8:30 Canadian Core Retail Sales. Estimate 0.5%

• 8:30 Canadian Retail Sales. Estimate 0.0%

• 8:30 Canadian Common CPI

• 8:30 Canadian Median CPI

• 8:30 Canadian Trimmed CPI

• 8:30 Canadian Core CPI.

• 9:45 US Flash Manufacturing PMI. Estimate 56.3

• 9:45 US Flash Services PMI. Estimate 56.4

• All Day – OPEC Meetings

Open: 1.3317 High: 1.3323 Low: 1.3262 Close: 1.3276

USD/CAD Technical

USD/CAD has posted small gains in the Asian and European sessions

• 1.3160 is providing support

• 1.3292 has switched to resistance following losses by USD/CAD on Friday. It is a weak line

• Current range: 1.3160 to 1.3292

Further levels in both directions:

• Below: 1.3160, 1.3067 and 1.2970

• Above: 1.3292, 1.3436, 1.3530 and 1.3637