- Weak Canadian economic data and a slide in crude oil price weigh on Loonie.
- USD/CAD holds to weekly gains, trading slightly below the 20-day MA.
The USD/CAD pair is trading around 1.3350, at the same level it closed yesterday. The loonie failed to hold to gains and retreat sharply.
Data released earlier showed a larger-than-expected decline in retail sales in November in Canada, triggering a drop of the loonie across the board. “Consumer spending added 2 ppts to GDP growth in 2017 but just 1.3 ppts last year. We think the contribution will be less than 1 ppt this year”, said Josh Nye, Senior Economist at RBC Capital Markets. Rate hike expectations for the first half of the year from the Bank of Canada continue to decline.
Another factor that is keeping the loonie under pressure today is crude oil prices. The WTI barrel is falling almost 2%, trading under $53.00. BoC Governor Poloz warned today about the impact of crude oil prices on the economy.
During the US session, the greenback weakened, but USD/CAD held near daily highs supported by the weak loonie. Earlier today the pair bottomed at 1.3304 and then bounced sharply to the upside. It peaked at 1.3369, the highest level since January 7, before pulling back modestly.
USD/CAD Levels to watch
The short-term outlook favors the upside, but the current rally was capped slightly below the 20-day moving average that stands at 1.3375. A break above could clear the way to more gains of the US dollar. On the flip side, a slide back below 1.3300 would remove the bullish pressure.
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