CAD/JPY trading in the 86.00 region post-Canadian Retail Sales miss

• Canada’s core retail sales fell -0.3% month-on-month in April falling short of market estimates.
• The Bank of Canada core inflation rose slightly to 1.5% year-on-year.
• CAD/JPY lost more than 80 pips on the Canadian miss and is now trading in the 86.00 area.

The CAD/JPY cross is trading in the 86.00 area down 0.60% on Friday as the core Canadian retail sales disappointed the market.

From a low at 86.25 in Asia, the CAD/JPY rose steadily throughout the European session to 86.75 then dropped heavily to the 86.00 area on the Candian news.

Earlier in the American session, Canada’s retail sales month-on-month beat analysts’ expectations at 0.6% versus 0.4% forecast in April with the core retail sales falling short of expectations at -0.3% versus 0.5% month-on-month. However, the Bank of Canada core inflation year-on-year in April came slightly above estimates at 1.5% against 1.4% forecast by analysts. The CAD/JPY in an immediate reaction to the news fell more than 80 pips and is now trading in the 86.00 area.

On the geopolitical front, the NAFTA (North American Free Trade Agreement) deadlines have been postponed. In a statement Robert Lighthizer, the US Trade Representative said that after nine months the United States, Mexico, and Canada “are nowhere near close to a deal.” He also pointed out that “there are gaping differences on intellectual property, agricultural market access, de minimis emission levels, energy, labor, rules of origin, geographical indications and much more”. No new dates have been announced yet and the uncertainties around NAFTA can also weigh on CAD.

CAD/JPY 4-hours chart

The trend is bullish and supports are seen at 85.31 swing low followed by 83.89 cyclical low. To the upside, bulls should meet resistance at the 86.25 swing low and at the 86.81 swing high, followed by 88.00 previous supply level.