Summary:
- Canadian core retail sales m/m: -1.8% vs 0.1% exp
- CAD sliding across the board post release
- USDCAD moves above D1 cloud and 200 day SMA
The Canadian retail sales for December showed an unexpected decline, and offer further support to the idea that seasonal shopping habits are changing. The headline reading showed a drop of 0.8% m/m against a consensus for unchanged and even though the prior reading was revised higher by 0.1% to 0.3% it is undoubtedly a negative shock.
A sizable drop in retail sales could be seen as a warning sign as to the health of the underlying economy. Source: XTB Macrobond
Turning our attention to the core reading, which is seen to give a more accurate gauge of consumer spending the results are even worse. In M/M terms the core reading showed a large 1.8% decline, the worst since March 2015. Given that a 0.1% rise was forecast this is obviously a bad miss and even though there was a similar upwards revision to the prior reading of 0.1%, the rise of 1.7% seen previously has now been wiped out.
In terms of market reaction the Canadian dollar has been moving lower since the data dropped, with the Loonie currently sliding across the board. The Japanese Yen is higher by 1% on the day agaisnt CAD but there are also notable gains for the AUD, CHF and NZD. Even the USD, which is the worst performer here is higher by 0.2%.
CAD is dropping against all of its peers following the data release. Source: xStation
The USDCAD made a potentially major break higher during Wednesday’s session with the pair breaking up through the Ichimoku cloud on D1. There have only been 3 previous breaks of the cloud in the best past of the last year and each time the break has led to a prolonged move in that direction.
USDCAD has broken the cloud on D1 and could now be seen to have moved into a possible uptrend. Source: xStation
Another trend identification technique that can be used by trader sis the 200 day SMA and recent gains in this pair have also seen a move above that. Since breaking below the 200 day SMA last June the market has been in an overall downtrend but in making what appears at present like a concerted move above this indicator earlier this week the longer term trend could be seen to have turned higher.
USDCAD has recaptured the 200 day SMA and could be seen to have now ended the downtrend that has driven the market since last summer. Source: xStation