USD/CAD Fails at the 200 SMA Despite A Weakening Canadian Consumer
USD/CAD turned positive in the last few days of 2023, after having been losing 7 cents for two months as the USD crashed on a policy reversal by the FED, which signaled the start of rate cuts in the coming months. This pair gained more than 3 cents in the last three weeks, however, as markets reconsidered the odds of the FED cuts and the price pierced above the 200 SMA (purple) on the daily chart, which has been acting as support and resistance before, but buyers gave up in the last few days and the price has reversed back down.
The economic data from the US has been showing an improving economy with Unemployment Claims falling below 200K, while consumer sentiment has also strengthened. The Retail Sales came above expectations in December, beating November which is hard to do due to Black Friday, while the Prelim UoM Consumer Sentiment jumped 9 points higher this month.
On the other hand, the Canadian consumer and the economy are showing signs of weakening further. On Friday, retail sales in Canada fell 0.2%, driven by decreased sales at food and beverage stores (-1.4%) and general category retailers (-1.8%). The December advanced estimate saves this from being a bad result, but there remains a significant — and presumably growing — disparity between Canadian and US consumers.
Canadian November 2023 Retail Sales and December Advance Estimate![Canadian retail sales]()
Canadian retail sales
November Retail Sales:
- Actual: -0.2%
- Expected: 0.0%
- Prior Month (October, revised): +0.5%
- November Advance Estimate: 0.0%
October Retail Sales:
- Overall: +0.7%
- Expected: +0.8%
- Excluding Auto: -0.5% (vs. -0.1% expected)
- Excluding Auto and Gas: -0.6% (vs. -1.2% last month)
- Prior Month (excluding auto): +0.6%
December Advanced Estimate:
- Advance estimate comes at +0.8%
USD/CAD jumped initially on the weaker headline, but then continued the retreat as the USD slipped lower and ended the day at 1.3430s. The stochastic indicator was oversold a few days ago and is now reversing lower, so this looks like a bearish reversing chart pattern. However, let’s see how the USD will behave in the coming days.
USD/CAD Live Chart
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