USDCAD Heading Towards 2020 Lows On Upbeat Retail Sales Data
Statistics Canada reports an improvement in retail sales for September from 0.4% to 1.1%, while the core component of the report (retail sales ex. gasoline and motor parts) also rose from 0.5% to 1.0%. Both sets of figures exceeded the market expectations of 0.2% and 0.0% respectively.
Increased sales at food/beverage stores and general merchandise stores contributed to the rise in sales volumes. Nine out of eleven sub-sectors representing 93.2% of retail sales showed an increase in retail volumes, sending retail sales up by 22.6% in Q3 2020 when compared with Q2 2020.
This report represents the 5th consecutive month of recovery in retail sales following the coronavirus-induced decline in April.
The USD/CAD did not show an immediate reaction to the retail sales report. However, it continued its downward slide as a result of USD-negative market sentiment that has prevailed in the market despite low trade volumes seen for most of the week. The USDCAD was last seen trading at 1.30452, as the pair gets perilously close to breaking below the 1.3000 price barrier.
Technical Levels to Watch
The USDCAD is now testing the support at 1.30385, and markets would be watching to see if the third time would be the charm following two failed attempts at breaking below this price level.
If traders who are bullish on the Loonie succeed in breaking below this price level, we could see a march towards the 1.29953 level, with 1.29241 just within the horizon. Attainment of the latter would send the USDCAD to its 2020 lows.
On the flip side, a bounce at 1.30385 could put 1.30982 at risk, with 1.31501 and 1.32044 lining up as additional targets to the north if sentiment on the pair sways towards the greenback.