CAD Firm On Oil Prices, Shorts on USDCAD Favored
Data released by Statistics Canada last Friday indicated that the economy is growing towards the benchmark inflation target. The consumer price index (CPI) increased 0.4% on a monthly basis, in May. In comparison with one year earlier, the index rose by 1.5%. The core CPI, which eliminates food and energy items, was at an annualized rate of 2.1% in May.
These strong numbers on price growth, are positive signals which may help boost the Loonie. Besides, the currency is also supported by rising oil prices as the supply side is showing some retreat. West Texas Immediate crude oil is above the threshold of $50/barrel currently.
Canadian retail sales for April will be reported later today, with economists’ expecting a 0.8% rise, compared with a fall of 1% in the preceding period.
Meanwhile, the greenback remains weak as the Federal Reserve continues to send out dovish signals on rates. In her testimony yesterday, FED President Yellen clarified before the Senate Banking Committee that the Fed’s benchmark interest rate is likely to remain low for some time, especially amid chaotic conditions globally resulting from the uncertainty regarding Britain’s membership of the EU.
The strength of the US economic recovery seems to be fading, due to weak data from the labor market and the fragile pace of investment, which illustrate the faltering nature of domestic demand. Even a rate increase in September is still questionable.
Fig. USDCAD D1 Technical Chart
The US Dollar is on course to slide against the CAD. The price is very weak and subdued under the 23.6% level of Fibonacci retracement. The Stochastic chart shows that the %K line (blue line) has crossed over the threshold of oversold territory, indicating that bears are taking the lead in the market. The price is expected to plunge further as signaled by the red trend indicator.
Sell stop at 1.27384, Stop loss at 1.28622, Take profit at 1.26311