USD/CAD: Sellers cheer WTI strength, eyes on Canadian Retail Sales/trade headlines

• USD/CAD extends previous declines amid WTI strength, ignores a lack of trade news.
• Canadian Retail Sales, US PMI and consumer sentiment data occupy economic calendar.
• Trade/political developments surrounding the US and China will also be the key.

USD/CAD remains under pressure following its pullback from six-week-high. The quote takes rounds to 1.3280 by the press time of the Asian session on Friday.

While pessimism concerning the phase one trade deal between the United States (US) and China has been downplaying trade-exposed currencies off-late, the Loonie pair recently benefited from the oil prices uptick to the two month high. The WTI declines could be attributed to geopolitical tension in Iran and a likely extension of global production cuts. Recent news from Global Times that China has just revised up its 2018 Gross Domestic Product (GDP) by 2.1%.

Also exerting downside pressure on the prices was hawkish comments from the Bank of Canada (BOC) Governor Stephen Poloz. "Poloz said the economy is in a good place and described monetary policy as "about right." However, the Bank continues to monitor for signs of spillovers and we do not think they will hesitate to act should the outlook deteriorate further," says TD Securities.

The US-China trade stalemate continues with the latest news suggesting the US may delay December 15 tariff high while Beijing still has the Trump administration diplomats on their invitation list. Further, the US Navy reported two ships rounded in the South China Sea, which in turn could push the dragon nation towards other rounds of warnings. The previous one was targeting the US House of Representative’s passage of Hong Kong Bill.

September month Canadian Retail Sales will be the first to entertain momentum traders during the US session whereas the US Markit Manufacturing and Services Purchasing Managers Index (PMI), followed by Michigan Consumer Sentiment Index, for November will play their roles afterward. During the meantime, US-China trade/political headlines could keep the driver's seat.

While US activity numbers are expected to flash upbeat readings, Canadian data could soften. “Retail sales will round out the week's data flow, with TD and the wider market looking for a 0.3% decline in September. Motor vehicles will weigh on the headline print after a pullback in auto sales, leaving the ex-autos measure down just 0.1%, while volumes should see a more substantial decline owing to higher consumer goods prices. This would still leave retail volumes up ~1% (annualized) for Q3, a slight pickup from the 0.4% increase in Q2 which contributed to the weakest quarter of household consumption since 2012,” says TD Securities.

Technical Analysis

With the five-month-old descending resistance line limiting near-term upside around 1.3330, the quote is likely declining towards 1.3200 and short-term rising trend line, at 1.3180.