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USDCAD Continues to Rally

Market Analysis


Good news from the US and poor news from Canada  helped USDCAD on it s way to new highs.

U.S. initial jobless claims declined 7k to 222k in February 17 week, after rising 6k to 229k (revised from 230k) in the prior week. This brought the 4-week moving average to 226k from 228.25k (revised from 228.5k). Continuing claims dropped 73k to 1,875k in the February 10 week, after rising 21k to 1,948k previously (revised form 1,942k). Six states and Puerto Rico estimated claims. This week’s initial claims number is important as it coincides with the BLS survey week for the next Non-Farm Payroll data on March 9.

Canada’s retail sales fell 0.8% in December after a revised 0.3% gain in November (was +0.2%). Retail sales ex-autos plunged 1.8.% following a revised 1.7% gain in November (was +1.6%). Sales fell at general merchandise (-5.3%), health and personal care (-3.8%) and electronic and appliance stores (-9.1%), overshadowing a 2.1% rise in motor vehicle and parts dealers and a 1.4% gain in food/beverage stores. The drop in electronic and appliance stores follows a 12.7% surge in November, which was driven by promotional activity and new product release tied to Black Friday according to Statistics Canada. The report is weaker than expected, but the risk was for a sizable drop-back in December given November/December swings in recent years. The details suggest Black Friday activity again pulled sales ahead from December into November. Retail sales volumes dropped 0.8% in December, adding to the downdraft around the December GDP forecast.

USDCAD rocketed to two-month highs of 1.2756 from 1.2700 following the much weaker Canada retail sales outcome. The breach of the 200-day moving average at 1.2722 marks the first time the pairing has topped the 200-day since June of last year. The pair were as low as 1.2624 post FED minutes last night.

A 50 pip, continuation with the trend, position from yesterday hit target earlier at 1.2693 and the H1 strategy also collected 12 pips from the entry at the completion of the 14:00 candle.


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Stuart Cowell

Senior Market Analyst


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