Last week, the Statistics Canada released optimistic inflation data that supported the Canadian dollar. In July, consumer prices in the country rose by 0.5%, which is significantly higher than market expectations at 0.1%. The USD/CAD currency pair moved down and updated local extremes.
At the moment, financial market participants expect a report on retail sales in Canada for June, which will be published on Wednesday, August 22 (15:30 GMT+3:00). This is an important indicator of consumer spending, which is also a mark of the country's economic growth.
Experts expect that the volume of retail sales in Canada will slow from 2.0% to 0.3%. The base retail sales index will be 0.1% compared to the previous value of 1.4%. We recommend paying attention to the difference between the actual and the forecasted values.
It should be noted that these statistics may affect the views of the representatives of the Bank of Canada on the future fate of monetary policy. At the moment, more than 75% of participants in financial markets assess the likelihood of an increase in rates by the Central Bank in October this year.
We also recommend you to follow the current news on NAFTA, which may have a significant impact on the dynamics of Loonie. Recent media reports show that negotiations between the US and Mexico are likley to be closed in a deal. At the same time, the future of the new agreement will directly depend on the decision of Canada.
- Support levels: 1.30500, 1.30000, 1.29650
- Resistance levels: 1.31100, 1.31700, 1.32150
Currently, USD/CAD is consolidating near the key support level of 1.30500. In the trading instrument a classic figure of technical analysis, Double top, has been formed, which signals a bearish sentiment. Indicators point to the power of sellers:
- the price has fixed below 50 MA and 200 MA;
- the MACD histogram has moved to the negative zone and continues to decline.
We recommend opening positions from the key levels.
If the price fixes below the support level of 1.30500, it is necessary to consider sales of USD/CAD. The immediate goal for profit taking is the round level of 1.30000. The movement is tending to 1.29650-1.29500.
Alternative option. If the price fixes above 1.31100, we expect the USD/CAD quotes to rise. The target movement level is 1.31700-1.32150.
Confirmations and entry points to the market should be looked for on lower timeframes. When following the positions, we recommend using a trailing stop.