Canadian Dollar Firm as Focus Turns to Retail Sales

Market overviews

Trading in Asian session is relatively subdued today, as some participants are already looking forward to the weekend, after a roller coaster ride. Canadian Dollar is currently the strongest one for the week, helped by rebound in WTI oil price, which is back above 71. However, New Zealand and Australian Dollars are the worst performing ones. Dollar and Yen diverged after risk markets stabilized and recovered. Euro is currently the weakest European major, in particular against Sterling.

Technically, we’d pay some attention to CAD/JPY, which could react further to Canada retail sales today, as well as the stock markets. It’s now pressing 87.94 support turned resistance. Firm break there would argue that whole corrective fall from 91.16 has completed at 85.40 already. Stronger rise would be seen back to retest 91.16 high in the coming weeks.

In Asia, at the time of writing, Hong Kong HSI is down -1.10%. China Shanghai SSE is down -0.75%. Singapore Strait Times is down -0.18%. Japan is still on holiday. Overnight, DOW rose 0.07%. S&P 500 rose 0.20%. NASDAQ rose 0.36%. 10-year yield dropped -0.015 to 1.265.

UK Gfk consumer confidence rose to -7, gradual release of pent-up demand

UK Gfk Consumer Confidence rose from -9 to -7 in July. The index has improved for six months in a row. Personal financial situation over next 12 months was unchanged at 11. General economic situation over the next 12 months dropped from -2 to -5. However, major purchase index rose from -5 to 2.

Joe Staton, Client Strategy Director GfK, says: “The healthy seven-point rise in the major purchase measure aligns with strong retail growth figures that reflect the gradual unlocking of the UK high street and release of pent-up demand as Brits hit shops, restaurants and venues. However, threats from increasing consumer price inflation, rising COVID infection figures, and the looming end of furlough and the Job Retention Scheme could put the brakes on this rebound.

Australia PMI composite dropped to 45.2, growth streak brought to a halt

Australia PMI Manufacturing dropped from 58.6 to 56.8 in July, a 4-month low. PMI Services dropped from 56.8 to 44.2, a 14-month low. PMI Composite dropped from 56.7 to 45.2, also a 14-month low.

Jingyi Pan, Economics Associate Director at IHS Markit, said: “Latest indications from the IHS Markit Flash Australia Composite PMI suggested that Australia’s growth streak had been brought to a halt in July, and perhaps no surprise given the renewed lockdowns aimed to bring the COVID-19 situation under control.”

Looking ahead

Eurozone PMIs, UK retail sales and PMIs will be featured in European session. Canada will release retail sales later in the day. US will also release PMIs.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2531; (P) 1.2562; (R1) 1.2595; More…

Intraday bias in USD/CAD remains neutral at this point and some consolidations could be seen. Further rise remains in favor as long as 1.2485 resistance turned support holds. On the upside, break of 1.2805 will extend the rise from 1.2005 to 1.3022 medium term fibonacci level next. On the downside, however, break of 1.2485 will bring deeper fall back to next cluster support at 1.2301 (61.8% retracement of 1.2005 to 1.2805 at 1.2311).

In the bigger picture, fall from 1.4667 is seen as the third leg of the corrective pattern from 1.4689 (2016 high). It should have completed after hitting 1.2061 (2017 low) and 50% retracement of 0.9406 to 1.4689 at 1.2048. Sustained break of 38.2% retracement of 1.4667 to 1.2005 at 1.3022 will pave the way to 61.8% retracement at 1.3650 and above. Overall, medium term outlook remains neutral at worst with 1.2048/61 support zone intact.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:00 AUD Manufacturing PMI Jul P 56.8 58.6
23:00 AUD Services PMI Jul P 44.2 56.8
23:01 GBP GfK Consumer Confidence Jul -7 -9 -9
6:00 GBP Retail Sales M/M Jun 0.50% -1.40%
6:00 GBP Retail Sales Y/Y Jun 9.60% 24.60%
6:00 GBP Retail Sales ex-Fuel M/M Jun 0.70% -2.10%
6:00 GBP Retail Sales ex-Fuel Y/Y Jun 7.80% 21.70%
7:15 EUR France Manufacturing PMI Jul P 58.3 59
7:15 EUR France Services PMI Jul P 59 57.8
7:30 EUR Germany Manufacturing PMI Jul P 64.1 65.1
7:30 EUR Germany Services PMI Jul P 59.5 57.5
8:00 EUR Eurozone Manufacturing PMI Jul P 62.5 63.4
8:00 EUR Eurozone Services PMI Jul P 59.6 58.3
8:30 GBP Manufacturing PMI Jul P 62.7 63.9
8:30 GBP Services PMI Jul P 62 62.4
12:30 CAD Retail Sales M/M May -3.00% -5.70%
12:30 CAD Retail Sales ex Autos M/M May -5.00% -7.20%
13:45 USD Manufacturing PMI Jul P 62 62.1
13:45 USD Services PMI Jul P 64.8 64.6