USD/CAD Forecast– Canadian dollar edges lower, US retail sales expected to slip

The Canadian dollar has ticked lower in the Friday session. Currently, USD/CAD is trading at 1.3389, up 0.24% on the day. On the release front, there are no Canadian events. In the U.S, the spotlight is on consumer spending. Retail sales and core retail sales are expected to drop sharply, with forecasts of 0.2% and 0.1%, respectively.

It has been a rough few weeks for the Canadian dollar. The currency has been under pressure since mid-November, losing 1.1 percent during the time. Weaker oil prices and a cooling U.S. economy have hampered Canada’s economy, and the BoC responded last week by remaining on the sidelines and maintaining interest rates.

In the U.S, weak inflation levels are another sign that the economy is slowing down. CPI dropped to 0.0% in November, down from 0.3% a month earlier. This marked the lowest level since May. Core CPI remained pegged at 0.2 percent. The weak readings can be attributed to falling oil prices, which has led to a sharp decline in gasoline prices. On an annualized basis, inflation gained 2.2 percent in November, down from 2.5 percent in October. With the U.S. economy showing signs of slowing down, and the global trade war taking a bite out of the global economy, inflation could continue to head lower as we head into 2019. This has led to a reassessment at the Federal Reserve of monetary policy. Earlier in the year, the Fed was sending messages that it would raise rates three or four times next year. This has been drastically scaled back, with some analysts predicting only one rate hike in 2019.

USD/CAD Fundamentals

Friday (December 14)

• 8:30 US Core Retail Sales. Estimate 0.2%

• 8:30 US Retail Sales. Estimate 0.1%

• 9:15 US Capacity Utilization Rate. Actual 78.6%

• 9:15 US Industrial Production. Estimate 0.3%

• 9:45 US Flash Manufacturing PMI. Estimate 55.1

• 9:45 US Flash Services PMI. Estimate 54.7

• 10:00 US Business Inventories. Estimate 0.6%

USD/CAD posted small gains in Asian trade and this trend has continued in the European session

• 1.3383 was tested earlier in support and is a weak line

  1.3461 is the next resistance line

  Current range: 1.3383 to 1.3461

Further levels in both directions:

• Below: 1.3383, 1.3292, 1.3198 and 1.3099

• Above: 1.3461, 1.3552 and 1.3696