We’ve got Canada’s retail sales figures comin’ right up, so I’m looking at this potential trend play on USD/CAD.
Do you think these inflection points might hold?
Before moving on, ICYMI, yesterday’s watchlist looked at AUD/CAD’s channel resistance test after seeing upbeat Australian jobs data. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. initial jobless claims beat market expectations again, coming in at 228K vs. 239K forecast and 237K previous
Philly Fed manufacturing index improved from -13.7 to -13.5 in July to reflect slower pace of contraction but still short of -10.5 consensus
Japanese national core CPI ticked higher from 3.2% year-over-year to 3.3% in June as expected, marking 15th straight month of inflation staying above target
U.K. retail sales accelerated to stronger than expected 0.7% month-over-month gain in June vs. projected 0.2% uptick and earlier downgraded 0.1% gain
Chinese FX regulator says commercial banks bought $8.3B worth of yuan-denominated assets in June vs. $3.3b in previous month, expects foreign investors to keep buying but will prevent sharp CNY volatility
BOJ likely to keep monetary policy unchanged in next rate statement but might revise inflation forecasts higher
Price Action News
The Greenback staged quite the comeback against its forex peers during the previous New York trading session, as better than expected initial jobless claims data lifted U.S. bond yields.
However, the yen took center stage later on when the national core CPI was released, as the figure came in line with expectations of another uptick. Other inflation components also pointed to elevated price pressures, but BOJ sources say that the central bank is still likely to sit on its hands.
Even so, the Japanese currency’s volatility surged across the board, chalking up big losses against the dollar and the Loonie.
Canadian headline and core retail sales at 12:30 pm GMT
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The dollar has been on the move in the past session, but it looks like the rally is stalling for USD/CAD!
What’s next for this pair now that the Canadian retail sales report is due?
Stronger than expected consumer spending data might be enough to encourage Loonie bulls to charge, taking the pair back below the pivot point (1.3160) and down for a test of the descending channel bottom or the previous day lows.
On the other hand, disappointing figures could spur a bullish breakout and a test of the next upside targets at R1 (1.3200) and R2 (1.3240).
There are no major reports due from Uncle Sam, but it’s worth noting that the latest initial jobless claims figure came in stronger than expected and lifted Treasury yields again.
Just make sure you take the average USD/CAD daily volatility of 70 pips when setting entries and exits!