With the initial market reaction to upbeat macroeconomic data releases from both Canada and the United States, the USD/CAD pair touched a fresh 2-day high at 1.34 before retreating slightly. As of writing, the pair was up 0.34% on the day at 1.3384.
Statistics Canada today reported that retail sales in February increased by 0.8% on a monthly basis following January's 0.4% decline. Other data from Canada today showed that, according to the ADP, employment in March increased by 13.2K.
However, with the greenback taking advantage of the upbeat data from the U.S., the pair didn't have a difficult time staying in the positive territory.
Retail sales in the U.S. rose by an impressive 1.6% in March to beat analysts' estimate for a growth of 0.7%. Additionally, initial jobless claims decreased by 5K to 192, its lowest level since 1969. Boosted by the data, the US Dollar Index, which earlier in the day advanced to 97.30 area amid risk-off flows, jumped to its highest level in two weeks at 97.42. Later in the session, the Markit's Manufacturing and Services PMI data will be the next driver of the greenback's valuation ahead of the Easter break.
With a decisive break above 1.3400 (daily high/Apr. 16 high), the pair could target 1.3450 (Mar. 28 high) and 1.3500 (psychological level). On the downside, support could be seen at 1.3330 (50-DMA), 1.3275 (Apr. 17 low) and 1.3230 (200-DMA).
James Knightley, chief international economist at ING, notes that the US retail sales surged 1.6% higher in March, its best reading since September 2017, and better than market expectations of a 1.1% gain.
“Motor vehicles and parts jumped 3.1% month on month, which was flagged by very firm new car sales numbers from manufacturers earlier in the month while gasoline station sales were also strong (+3.5%MoM) due to the significant rise in gasoline prices over recent months. Gasoline bottomed at $2.23/gallon on 8 January according to the American Automobile Association while the national average stands at $2.84 today.”
“Even outside of these volatile sectors the story is encouraging with 12 of the 13 subcomponents reporting growth. Furniture saw sales rise by 1.7%, clothing was up 2% and non-store retail rose 1.2%. Sporting goods were the one negative, falling, 0.3%MoM. This means that the "control group", which removes autos, food, gasoline and building materials and better matches the consumer spending component of GDP rose 1%MoM versus the consensus estimate of a 0.4%MoM increase.”
“Retail sales appear to be bouncing back after a weak end to 2018. With employment continuing to rise, wage growth picking up and consumer sentiment remaining firm, we look for consumer spending to make an ongoing positive contribution to US GDP growth. Currently, the Atlanta Federal Reserve GDPNow model is suggesting the economy expanded at a 2.4% annualised rate in 1Q19, but after today's figures, this is likely to push towards 2.6%.”
• A goodish pickup in the USD demand exerts some fresh pressure at higher levels.
• Stronger US monthly retail sales provided an additional boost to the greenback.
• Weakness below weekly lows might prompt some aggressive technical selling.
The AUD/USD pair extended its intraday rejection slide from the 0.7200 handle and refreshed session lows in reaction to mostly upbeat US macro data.
The pair continued with its struggle to sustained/build on its momentum beyond the 0.7200 handle and once again witnessed some long-unwinding trade from the very important 200-day SMA amid a goodish pickup in the US Dollar demand.
Sluggish Euro-zone PMI prints reignited global growth concerns and partly offset the latest optimism over a possible US-China trade deal, which eventually turned out to be one of the key factors benefitting the greenback's relative safe-haven status.
The already stronger USD got an additional boost in wake of upbeat US monthly retail sales data for March and steady initial weekly jobless claims, with bulls shrugging off a slight disappointment from the Philly Fed Manufacturing index for April.
The latest leg of a downtick since the early European session has now dragged the pair back closer to weekly lows, which if broken might prompt some fresh technical selling and pave the way for further intraday weakness ahead of a long Easter weekend.
Technical levels to watch
Ramya Muthukumaran, economist at the Royal Bank of Canada, notes that the Canada’s February retail numbers came out slightly stronger than expected but part of the increase reflected higher gas prices that pushed up sales at the pump by 1.9%.
“Retail sales rose 0.8% in February, stemming from strength in general merchandise stores and motor vehicle and parts dealers.”
“Excluding prices, volume sales were inched up 0.2% in February. They are still up 1.7% year-over-year.”
“Volume sales inched up but by a modest 0.2%. Weather might have been a factor slowing sales in some categories, but downward revisions to earlier months also imply overall consumer spending is still slow.”
“We still see much of the softness in overall economic growth in Q1 as transitory in nature, with a bounce-back expected in Q2 as weather related effects wear off and oil production cuts ease. But household spending is unlikely to be the main driver of growth.”
According to analysts at TD Securities, for the US economy, residual seasonality continues to be a lingering factor in first and second quarter GDP data.
“Despite a recent effort by the Bureau of Economic Analysis aimed at addressing this shortcoming, studies suggest seasonality effects are still persistent in the seasonally-adjusted growth figures.”
“According to recent research by the Federal Reserve Bank of Cleveland, residual seasonality reduces GDP growth in the first quarter by -0.6pp on average, while it boosts the second quarter by 0.5pp. These results largely match what has been evident in the data in recent years.”
“This pattern suggests some lingering residual seasonality could affect the upcoming release of Q1 GDP data (out on 26 April). Nowcast estimates suggest Q1 GDP growth might exceed 2%, despite a number of uncertainties at the beginning of the year. We forecast GDP growth to print 2.3% in Q1.”
“If this forecast holds, then Q2 GDP growth might not be as strong as some market participants have been expecting, given a negative relationship between quarters. However, we could well end up with more of a "goldilocks" scenario in which GDP grows at or above potential in both quarters.”
USD/CAD daily chart
USD/CAD 4-hour chart
USD/CAD 30-minute chart
Additional key levels
"The index for current manufacturing activity in the region decreased from a reading of 13.7 in March to 8.5 this month," the Federal Reserve Bank of Philadelphia said in its latest Manufacturing Business Outlook Survey.
Key takeaways from the press release
"Employment in Canada increased by 13,200 jobs from February to March according to the March ADP Canada National Employment Report," the ADP said in its press release.
Ahu Yildirmaz, vice president and co-head of the ADP Research Institute:
“We saw modest gains in the month of March. Leading job growth was manufacturing, which posted the strongest gains in a year. Construction and professional services rebounded while natural resources and mining, trade, information and financial services continued to struggle.”
• The shared currency continues to be weighed down by today’s sluggish Euro-zone PMIs.
• The USD gets an additional boost after stronger than expected US monthly retail sales.
The EUR/USD pair maintained its heavily offered tone through the early North-American session and dropped to fresh one-week lows, further below mid-1.1200s post-US macro data.
Having repeatedly failed to find acceptance above the 1.1300 round figure mark, the pair met with some aggressive selling pressure on Thursday after yet another disappointing release of Euro-zone PMI prints for April. Sluggish European data weighed heavily on the shared currency and also reignited global growth fears, which further underpinned the US Dollar's relative safe-haven status.
The greenback got an additional boost in reaction to the latest macro data, showing that the US monthly retail sales recorded a stronger than expected 1.6% m/m growth in March. Adding to this, core retail sales - excluding automobiles, and the closely watched Retail Sales Control Group also bettered market expectations and remained supportive of the bid tone surrounding the buck.
Meanwhile, the better than expected release of the usual initial weekly jobless claims, coming in at 192K for the week ended April 12 as compared to a rise to 205K expected, was partly offset by a slight disappointment from the Philly Fed manufacturing index, which fell to 8.5 for April from 13.7 previous and 10.4 anticipated, and thus, failed to provide any additional bullish impetus.
Nevertheless, the pair remains on track to end the week on a downbeat note and erode a major part of the last week's goodish recovery gains, clearly indicating the resumption of the prior/well-established bearish trend.
Technical levels to watch
"In the week ending April 13, the advance figure for seasonally adjusted initial claims was 192,000, a decrease of 5,000 from the previous week's revised level," the U.S. Department of Labor announced on Thursday.
Key takeaways from the press release
GBP/USD is trading below the round number of 1.3000 in reaction to the upbeat US retail sales. Headline sales rose by 1.6% in March, core sales by 1.2%, and the control group by 1%. The increase in the control group, known as the "core of the core" is somewhat more moderate when considering the downward revision in the data for February.
The US Dollar reacted positively, and GBP/USD dropped off 1.3000, hitting a low of 1.2992. The fall also sent cable below the long-running uptrend support line that accompanies the pair since early March.
Further support is seen at 1.2985 (April low), 1.2960 (March low), 1.2895, and 1.2830. Resistance is at 1.3030 (recent support line, and 1.3070 (recent swing high).
Earlier, UK retail sales also beat expectations, helping GBP/USD escape the 1.3000 level. However, the market mood weighs on the pair. The safe-haven US Dollar rose after German Manufacturing PMI missed expectations, causing concerns about global growth.
According to analysts at Westpac, the Australian consumer mood is delicately balanced heading into mid-2019.
“The Westpac–Melbourne Institute Consumer Sentiment Index has firmed a touch in the latest month but this is almost entirely due to a substantial boost from the Federal Budget – the projected return to surplus and additional tax relief producing the most positive response in many years.”
“The key question of course is the degree to which the lift is sustained. Our concern is that it proves to be short-lived. Adding to this are clear signs of rising pressure on family finances and consumers’ extremely high levels of risk aversion.”
“Both of these developments reflect the ongoing correction in Australia’s housing markets, centred in Sydney and Melbourne. That correction is again looking likely to be somewhat deeper and more protracted than at the start of the year.”
“That has raised the prospect of more substantive negative ‘spillovers’ to consumer demand.”
“Accordingly, we have again pared back our forecasts for growth in consumer spending in 2019, the growth now expected to track with a 2.2% annual pace as a wealth effect drag sees the savings rate rise from 2.5% to 5%.”
"Following three consecutive monthly declines, retail sales rose 0.8% in February to $50.6 billion," Statistics Canada reported on Thursday.
Key takeaways from the press release
The (advanced) data published by the U.S. Census Bureau showed that retail sales in March increased by 1.6% in the U.S. to beat the market expectation of 0.9%.
Key takeaways from the press release
According to analysts at TD Securities, the April Flash PMIs of Eurozone were mixed, with the euro area Manufacturing PMI picking up slightly to 47.8 while the Services PMI slipped to 52.5.
“In France, the Services PMI jumped to 50.5, its fastest pace in 5 months. In Germany, the Manufacturing PMI disappointed with a small increase to 44.5 and details suggest a relatively weak underlying picture as new export business and backlogs of work were lower.”
USD/JPY 4-hour chart
Additional key levels
The USD/CHF pair closed the day in the positive territory for the 9th time in the last ten days on Wednesday and preserved its bullish momentum today to advance to its highest level since early March at 1.0118. As of writing, the pair was trading a couple of pips below that level, adding 0.15% on a daily basis. If the pair surpasses the 1.0128 mark, where the November 2018 peak is located, it will reach its highest level in more than 2 years.
The broad-based USD strength today's seems to be fueling the pair's upsurge. Ahead of the IHS Markit's preliminary Services and Manufacturing PMI data and March retail sales figures, the US Dollar Index is adding 0.3% on the day at 97.31.
Previewing the retail sales report, "We expect the 0.7% m/m improvement in sales in the key control group to be supported by a normalization in tax refunds, rising real disposable income and a still humming labor market,” TD Securities analysts said.
The heavy selling pressure witnessed on the shared currency following the disappointing Manufacturing PMI releases fro Germany and the eurozone seems to be boosting the demand for the greenback, which is seen as a safer alternative.
• The precious metal stalled its recent decline and managed to stage a modest recovery from support marked by 50% Fibo. level of the $1196.40-$1346.85 strong up-move.
• Slightly oversold conditions on the 4-hourly chart prompted some short-covering amid resurfacing global growth concerns following today's sluggish Euro-zone PMI prints.
• However, given that the commodity has already confirmed a near-term bearish break through a descending triangle, the current bounce might still be seen as a selling opportunity.
• Hence, the recovery seems more likely to confront some fresh supply and fizzle out near the triangle support break-point, now turned resistance - around the $1281-82 region.
• Any subsequent up-move seems more likely to remain capped near the $1289 confluence barrier - comprising of 100-day SMA and 38.2% Fibonacci retracement level.
Gold daily chart
Although the weekly EIA data showed that crude oil inventories decreased by 1.4 million barrels for the week ending April 12, crude oil prices struggled to gather momentum and the barrel of West Texas Intermediate closed the day below the $64 mark.
Earlier today, the data published by the IHS Markit showed that the business activity in the manufacturing sector continued to contract in Germany and the eurozone, causing concerns over an economic performance weaker than initially expected in the euro area. The risk-off atmosphere weighed on the demand for commodities and pushed the WTI lower to $63.50 area.
However, with the Joint Organisations Data Initiative (JODI) reporting that Saudi Arabia's crude oil exports in February dropped to 6.977 million provided a modest boost and helped the WTI retrace its daily fall.
There won't be any data releases that could impact crude oil's trading action in the remainder of the week and the WTI is likely to continue to fluctuate in its two-week-old $63.50 - $64.50 range.
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