AUS: Canadian dollar slips as investors refuse to fuel the rally as USD-CAD engages
Risk-off conditions are proving a drag today, a short term rally for USD vs CAD beckons.
The Canadian dollar (Currency:CAD) is weaker today as markets indicate a reluctance to drive further strength following the 2.4 pct rally since July 25th.
The pound to Canadian dollar rate is 0.5 pct down on Tuesday night's closing level at 1.5683.
The US dollar to Canadian dollar exchange rate is 0.51 pct higher at 0.9939.
"Yesterday’s candle suggests a near term bottom in USD-CAD, with the potential for a short term rally. USD-CAD has declined to levels lower than what would be expected by both oil prices and 2Y bond yield spreads, and a small rally would merely restore USD-CAD back to levels suggested by some of its key drivers. We remain CAD bulls over the forecast period and expect continued strength through 2013," says Camilla Sutton at Scotiabank.
Sean Osborne at TD Securities comments: "USD-CAD’s push above 0.9900 yesterday was the most constructive price action we have seen in the past week. The next clear resistance looks to be in the 0.9940/50 area."
On the domestic front retail sales lie ahead. While a stronger pace of hiring emerged over Q2, the combination of an uncertain global backdrop, lower gasoline prices and weak auto sales are expected to leave retail sales unchanged in the month of June.
The core measure – which excludes autos – is forecast to rise by a modest 0.2 pct during the month by TD Securities. After adjusting for the impact of changing prices, retail sales volumes are expected to be more constructive for industry-level real GDP.
However, it will be issues of a global nature that matter for the Canadian currency going forward. We note the risk-off tone is proving a drag.
Risk sentiment has taken a sour turn overnight, with risk-off signals flashing across equities, commodities, and fixed income. Weak Japanese trade data was credited with triggering the move, but after several weeks of slowly grinding higher the risk rally was getting a little long in the tooth, and the market may have been eager for a catalyst.
The S&P 500 has made an almost uninterrupted march higher since the beginning of the month. USD/CAD has followed right along with that move, and now looks to be making a turn also.
