CAD is becoming a more attractive option than AUD and NZD, thanks in large part to the broad resilience of USOIL and also the downtrend in US infections while mortalities remain elevated. Next week, the Canadian growth figures for July will be closely watched, possibly showing another monthly gain, but the y/y decline is still hovering around -10%. The reading, however, shouldn’t have any make or break implications for the Loonie, as long as the downside remains limited to oil – still more resistant than most of its procyclical counterparts to swings in risk sentiment. It will be interesting to follow the speech of Governor of the Board of Commissioners Macklem in Jackson Hole.
CAD ended last week on a high, as Canadian retail sales surged in June. The headline figure jumped 23.7%, after rising 18.7% in May. The core reading was up 15.7%, up from the previous 10.6%. Consumer spending is hampered as Covid-19 weighs on the economy, but this reading is another sign that the economic recovery is starting to pick up.
On Monday, the Conference Board of Canada (CB) released a report, which said that the recovery from Covid-19 will take longer than expected. The CB said that although the third quarter showed strong figures, Canada’s economic output would not return to pre-pandemic levels until the end of 2021. The economic outlook will largely depend on the pace of recovery in the United States, which is Canada’s biggest trading partner.
USDCAD intraday bias remains neutral for further consolidation. Further decline is possible as long as the 1.3270 Resistance remains intact. The break of 1.3133 should extend the bigger decline from 1.4667 to the longer term level of 1.3000. On the upside, taking into account the conditions of bullish convergence from the double bottom, a strong break at 1.3270 would confirm near term bottoming. The intraday bias may return to the upside to rebound to the higher Resistance at 1.3346.
In the daily view, the price is forming a low at 1.3133. Weekly Resistance area which becomes Support and vice versa, is clearly seen at the price level 1.3350-13375. On the downside there is room which will serve as Support which is still originating at the price level of 1.3040 and lower at 1.2951.
In the bigger picture, gains from 1.2060 (2017 low) finished at 1.4667 after failing to break 1.4689 (2016 high). The decline from 1.4667 could be a corrective pattern from 1.4689. As long as Resistance holds at 1.3715 , there is a tendency for CAD to strengthen further against USD. However, a sustained break of 1.3715 should turn focus back to the key resistance 1.4689.
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Ady Phangestu
Market Analyst – HF Educational Office – Indonesia
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