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Canadian Dollar remains vulnerable after strong US Retail Sales

  • Canadian Dollar gives away gains as USD bounces up following strong Retail Sales data.
  • Investors’ concern that Middle East conflict might escalate provides additional support to the safe-haven US Dollar.
  • Oil prices have depreciated nearly 3.5% from early April highs, adding negative pressure to CAD.

The Canadian Dollar (CAD) recovery attempt seen during Monday’s European session has been short-lived. The US Dollar has resumed its bullish trend as better-than-expected retail consumption data has confirmed the strong momentum of the US economy.

The strong Retail Sales figures come after last week’s sticky inflation numbers, strengthening the view that the Federal Reserve (Fed) will be keeping rates higher for longer. This is supporting the US Dollar, which has additional support from the volatile situation in the Middle East. Israel is considering retaliating against Iran, which could spark a regional conflict, which ultimately increases demand for the USD on the back of its safe-haven status.

In Canada, February’s Manufacturing Sales data improved, as expected, although Wholesale Sales stalled. Furthermore, Oil prices, Canada’s main export, are pulling back from last week’s highs, adding pressure to the Loonie.

Daily digest market movers: USD/CAD maintains its bullish tone on bright US data and risk aversion

  • Canadian Dollar retraces previous gains, with the USD bouncing up on upbeat consumption data. The daily chart is practically flat.
  • US Retail Sales increased 0.7% in March from 0.9% in February, well above the 0.3% increment expected by the market.
  • Excluding autos, total sales of retail and food stores have risen 1.1%, their best reading since January 2023. The market had expected a 0.4% advance.
  • NY Fed President John Williams has acknowledged the importance of the recent inflation levels but assured that he expects rate cuts to come this year.
  • Canada’s Manufacturing Sales increased 0.7% in February from 0% in the previous month, in line with the market forecasts.
  • Canadian Wholesale Sales, however, stalled in February against market expectations of a 0.8% increase.
  • WTI Oil prices have retreated to two-week lows at the mid-range of $84, down from the $87.60 high reached over the previous weeks.

Canadian Dollar price today

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the weakest against the Pound Sterling.

USD   0.08% 0.00% -0.03% 0.18% 0.66% 0.38% 0.00%
EUR -0.07%   -0.08% -0.10% 0.10% 0.58% 0.30% -0.07%
GBP -0.01% 0.08%   -0.03% 0.17% 0.66% 0.37% 0.01%
CAD 0.03% 0.11% 0.02%   0.20% 0.68% 0.40% 0.02%
AUD -0.18% -0.11% -0.19% -0.21%   0.47% 0.19% -0.18%
JPY -0.65% -0.57% -0.63% -0.68% -0.47%   -0.25% -0.65%
NZD -0.38% -0.31% -0.39% -0.40% -0.21% 0.28%   -0.37%
CHF 0.00% 0.07% -0.01% -0.04% 0.16% 0.65% 0.37%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Technical analysis: USD/CAD remains bullish, with downside attempts limited above 1.3700

The US Dollar maintains the bullish bias intact, with the Loonie’s recovery attempt capped well above previous highs in the 1.3700 area so far.

The pair broke the top of last month’s trading channel last week and is now testing the resistance area at 1.3780. The USD/CAD pair is at overbought levels but not at extremes, with the measured target of the broken channel at the mid-November high of 1.3845. On the downside, supports are 1.3680-1.3660 and below there at 1.3545.

USD/CAD Daily Chart

Canadian Dollar remains vulnerable after strong US Retail Sales

Risk sentiment FAQs

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.


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