USDCAD Forecast: Canadian dollar subdued as U.S retail sales within expectations

The Canadian dollar is almost unchanged in the Monday session. Currently, USD/CAD is trading at 1.3145, down 0.07% on the day. On the release front, Canadian Foreign Securities Purchases dropped sharply to C$2.18 billion, well short of the estimate of C$7.03 billion. This marked a 5-month low. In the U.S core retail sales dropped to 0.4%, matching the estimate. Retail sales dropped to 0.5%, edging above 0.4%. 

In the U.S, the focus is on consumer spending reports, with both retail sales and core retail sales expected to drop to 0.4%. On the manufacturing front, Empire State Manufacturing Index is forecast to drop to 20.3 points. On Tuesday, Federal Reserve Chair will testify before the Senate Banking Committee and Canada releases Manufacturing Sales.

The U.S economy is firing on all cylinders and received a vote of confidence from the head of the Federal Reserve. On Thursday, Powell said that the economy is “in a really good place”, pointing to President Trump’s massive tax cut scheme and increased spending as key factors in boosting economic growth. Powell did not address monetary policy and said he was uncertain as to the effects of the current trade disputes which has embroiled the U.S and its trading partners. The Fed will likely press the rate trigger in the second half of the year, but it is an open question as to whether we’ll see one hike over the next six months. The Fed is projecting growth of 2.8% in 2018, compared to 2.3% in 2017. Powell will be in the spotlight next week when he appears for his semi-annual testimony before Congress.

Trade policy is not part of the Federal Reserve’s mandate, but Fed policymakers continue to voice concern about the escalating trade war between the U.S and its major trading partners, particularly China. On Friday, Dallas Fed President Robert Kaplan said he would have to downgrade his outlook if the tariff battle continues. Kaplan said that U.S tariffs on steel and aluminum imports had dampened capital expenditures plans and further trade tensions could lead to currency fluctuations and geopolitcal instability.

Trade ,earnings ,teapots and the US dollar

China Q2 GDP growth as expected, though lower than Q1

• 8:30 Canadian Foreign Securities Purchases. Estimate 7.03B. Actual 2.18B

• 8:30 US Core Retail Sales. Estimate 0.4%. Actual 0.5%

• 8:30 US Retail Sales. Estimate 0.4%. Actual 0.4%

• 8:30 US Empire State Manufacturing Index. Estimate 20.3

• 10:00 US Business Inventories. Estimate 0.4%

• 8:30 Canadian Manufacturing Sales

• 9:15 US Capacity Utilization Rate. Estimate 78.4%

• 9:15 US Industrial Production. Estimate 0.5%

• 10:00 US Federal Reserve Jerome Powell Testifies

• 10:00 US NAHB Housing Market Index. Estimate 69

• 16:00 US TIC Long-Term Purchases. Estimate 34.3B

Open: 1.3157 High: 1.3167 Low: 1.3137 Close: 1.3145

USD/CAD Technical

USD/CAD posted small losses in the Asian and  European sessions. The pair has posted slight gains early in the North American session

• 1.3067 is providing support

• 1.3160 was tested earlier in resistance. It remains a weak line

• Current range: 1.3067 to 1.3160

Further levels in both directions:

• Below: 1.3067, 1.2970 and 1.2831

• Above: 1.3160, 1.3292, 1.3436 and 1.3530