USD/CAD rises above 1.2700, eyes test of 21DMA at 1.2740

USD/CAD has been on the front foot for the majority of Friday’s session, rising back above the 1.2700 mark and into the 1.2750s from its early Asia session levels of closer to 1.2650. USD/CAD bulls are eyeing a test of the pair’s 21DMA at 1.2740, as well as potentially a key downtrend just above it around 1.2750. This downtrend, which links highs going all the way back to December, marks to upper bounds of a downwards trend channel that USD/CAD has respected very well over recent weeks. CAD is one of the underperforming currencies on Friday, despite strong retail sales numbers for November, amid softness in crude oil prices and other risk assets and expectations that December retail sales will be much weaker.

Strong November retail sales numbers fail to come to CAD’s aid

Canadian retail sales numbers for November were significantly stronger than expected, though CAD was not overly impressed. On a MoM basis, headline retail sales were up 1.3%, well above expectations for a rise of 0.1%, while Core sales were even stronger, posting MoM growth of 2.1% versus expectations for 0.3%. Capital Economics writes that the reason for the increase was tighter Covid-19 economic restrictions during the month that caused consumers to spend more on goods and less on services (like hospitality, travel and leisure). However, the economic consultancy does think that some of the strength in November appears to have been borrowed from December; “Stats Can speculated that consumers ordered goods for the holiday season earlier than normal due to concerns about shipping delays, and because of the larger-than-usual Black Friday discounts”, they note. Weak expectations for December have thus seemed to nullify any optimism over the strength seen in November.

USD/CAD four hour chart