The Loonie Eases Following Retail Sales Report
On Friday, the dollar rebounded slightly versus the Loonie, recapturing short-term support. U.S. Treasury yields edged lower. Canadian retails were stronger than expected and moved higher for November, while the U.S. Leading Economic Indicators aligned with expectations. Next week the currency markets will focus on the Federal Reserve meeting. The FOMC will likely continue to discuss inflation expectations.
Technical Analysis
The USD/CAD rebounded slightly on Friday. Support is seen near the 200-day moving average on near 1.2497. Resistance is seen near the 10-day moving average at 1.2541. The 10-day moving average crossed below the 50-day moving average, which means a short-term downtrend is in place. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. The exchange rate has moved out of the oversold territory and is printing a reading of 28 up from 3. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in negative territory with a downward sloping trajectory which points to a lower exchange rate.
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Canada Retail Sales Moved Higher
Canada retail sales for November climbed 0.7%, while market expectations were for a 1.2% increase. The previous month’s retail sales rose by 1.5% compared to expectations to rise 1.6%. Higher sales at gasoline stations led to higher sales for the month.