USD/CAD Remains Supported by the 50 Daily SMA As BOC Turns Dovish
Since July, when it reversed at 1.31, USD/CAD has been bullish, making higher lows in the process. In late October, the price broke above the resistance zone around 1.38, as the USD was making good gains on the potential of the FED raising interest rates further. On the daily chart, the price was headed toward the next resistance zone, close to 1.39, and it barely crossed above 1.3900, but then reversed lower and has been making lower highs since, indicating that a wedge is forming and a breakout is imminent.
The USD has been on a retreating period for about a month, with other majors taking full advantage of the weakness in the greenback, but the CAD has mostly missed that and the larger trend here still remains bullish in favour of the USD. Moving averages have been acting as support on the daily chart, with the 50 SMA (yellow) holding during pullbacks lower for most of this month and yesterday we saw another rejection at this moving average after the retreat in the USD. The daily candlestick closed as a doji, which indicates a bullish reversal.
Bank of Canada’s Macklem Comments
- Canada interest rates may now be restrictive enough.
- Excess demand that made it too easy to raise prices is now gone.
- Reiterates that if high inflation persists, the Bank of Canada is prepared to raise its policy rate further.
- The Canadian economy is approaching balance, we expect it to remain weak for the next few quarters, which means more downward pressure on inflation.
- Inflation in Canada is still too high and progress cutting it is slower than we had hoped.
- Expectations for near-term inflation have been slow to come down and this is a concern
- Long-term inflation and to have remained well-anchored
Canada Retail Sales for October
- Retail sales for September 0.6% vs 0.0% estimate
- Prior month -0.1% (they were expecting -0.3%)
- The September advance estimate was 0.0%
- Retail sales for September 0.6% vs 0.0% est.
- Core sales ex auto 0.2% vs -0.2% est.
- Prior month ex. auto, +0.1%
- Ex auto and gas -0.3%% vs -0.3% last month
- October advanced estimate 0.8%
- Retail sales were up in 4 of 9 sectors led by increases in motor vehicle and parts dealers (+1.5%)
- Also contributing to the increase in retail sales in September were higher sales at gasoline stations and fuel vendors (+3.2%). In volume terms, sales at gasoline stations and fuel vendors increased 2.3%.
Statistics Canada has released an advance estimate of retail sales for October, indicating a 0.8% increase. However, this figure is subject to revision as it is based on early data from only 48.7% of the surveyed companies. The average final response rate for this survey over the past year was 88.6%.
The USDCAD is moving lower after the better-than-expected report and looks toward the low from earlier this week at 1.3650. The low today has reached 1.3657.
USD/CAD Live Chart
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