USD/CAD Breaks 1.36 After the Retail Sales Report

Posted Wednesday, August 23, 2023 by
Skerdian Meta • 2 min read

The rally in USD/CAD remains on following a short period of consolidation and the upside momentum is looking strong again, with moving averages acting as support on the H1 chart above, holding the price during retreats lower. Earlier today buyers pushed the price above 1.36, so now the initial target for this upward move is the resistance level at 1.3653. If there is a clear and significant breakthrough at this level, it would confirm that the correction phase that occurred after reaching 1.3976 has concluded. In that case, the currency pair could aim to retest that previous high of 1.3976.

However, to signal a potential reversal in the short term, it would require a drop below the 1.3495 zone which has acted as support before. If this support zone is breached, it might indicate that the recent upward movement is stalling. In the absence of this breakdown, the overall outlook will remain cautiously optimistic, even if there’s a temporary pullback.

June Canada Retail Sales Report

June Canada retail sales +0.1% vs +0.0% expected
May retail sales were +0.2%
June advance reading was 0.0%
Core sales ex-autos -0.8% vs +0.3% expected (prior was 0.0%, revised to -0.3%)
July advance reading +0.4%
June year-over-year sales -0.6% vs +0.5% prior
Core sales ex-autos YoY -3.3%

The only aspect of sales that is showing strength is vehicle sales. I’m curious if some of this strength is due to orders being delayed, possibly because the inventory of Canadian-made vehicles is lower compared to the United States. In any situation, what’s catching the market’s attention is the sales number that excludes auto sales, rather than the overall headline number. This particular number is known as the “ex-autos” number. As a result of this focus, the USD/CAD exchange rate has increased by 37 pips to reach 1.3586, and it might see a few more pip gains due to this situation.

Buyers in the USD/CAD market managed to push the price higher, surpassing a range of prices between 1.3564 and 1.3585. This movement was triggered by disappointing retail sales data from Canada. These buyers are now aiming for the price levels that were at the high and low points in April and May. To achieve this, it’s important for the price to stay above the previously mentioned range of 1.3564 to 1.3585 where we are right now. If it does, there’s a realistic chance that this bullish trend could continue.