Canadian dollar directionless

The Canadian dollar was uneventful for most of last week and the lack of activity has continued on Monday. Currently, the pair is trading at 1.3089, down 0.03% on the day. There are no Canadian releases this week, so key US events could have a magnified impact on the movement of USD/CAD.

In the US, the week started on a positive note, as PMIs, which are key gauges of economic activity, accelerated in October and beat their estimates. Manufacturing PMI rose from 53.3 to 56.7 points. This marked its highest level since 2014, as the PMI moved well into expansionary territory. Services PMI also looked sharp, rising to 57.7 points, up from 56.0 points. This was the highest reading since 2015.

Canada retail sales climb

Canada ended the week on a positive note, as retail sales in September moved higher and crushed the estimates. Headline retail sales jumped 1.1%, up from 0.4% beforehand. Core retail sales rose from 0.5% to 1.0%. The street consensus was much lower, with forecasts of 0.2% for the headline figure and 0.0% for core retail sales. The Canadian dollar, which had a quiet week, shrugged off the strong retail sales numbers.

Will consumers continue to keep their wallets open? The Covid-19 pandemic has caused tremendous damage to the economy, and there are serious concerns that the resurgence of Covid could have a severe impact on the normally robust Christmas shopping season. With the Canadian economy taking tenuous steps in recovery, a disappointing Christmas could spell trouble for both the economy and the Canadian dollar.

USD/CAD Technical

  • There is support at 1.3038. Below, there is a support line at 1.2982
  • We find resistance at 1.3145, followed by resistance at 1.3196
  • USD/CAD remains situated at the 10-day MA level, as the pair continues to range-trade

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Source: Market Pulse