A Decline In Canadian Retail Sales Would Validate The Bearish Loonie Technical Outlook

Published April 23rd, 2009 - 08:53 GMT

Canadian retail sales are forecasted to have fallen by 0.3% in February as mounting job losses continue to lead to consumers tightening their wallets. The unemployment rate rose to a seven year high of 8% as companies continue to look to cut costs in the current tough environment.





Fundamental Outlook

Canadian retail sales are forecasted to have fallen by 0.3% in February as mounting job losses continue to lead to consumers tightening their wallets. The unemployment rate rose to a seven year high of 8% as companies continue to look to cut costs in the current tough environment. Another month of declining consumption would be the fourth in the last five which will begin to dry up domestic growth, adding pressure to the Canadian economy which has seen demand for its exports disappear.  Indeed, BoC Governor Carney cited the intensifying global recession as the main reason the central bank lowered its benchmark rate to 0.25% from 0.50% at Tuesday policy meeting. Despite the central bank forecasting that they see GDP contracting by 3% in 2009, many are beginning to speculate that they may refrain from quantitative easing which they may announce during tomorrow’s monetary policy report. This could be a bullish development for the “loonie” as markets have already priced in the non-standard measures which could make the retail sales report a non-factor.


Technical Outlook



I wrote yesterday that “near term, a short term impulse may be complete or close to complete.  If so, then a corrective decline should unfold down to at least 1.2330.”  The correction reached 1.2330 but that drop may have been just wave a of an a-b-c decline.  Look for support below 1.2325.  Fibonacci support begins at 1.23 and extends to 1.2177.  I’ll be looking to buy in this zone.  A push above 1.2510 would suggest that 1.2325 was the end of the correction and that the USDCAD is headed higher in wave iii of 5.        

For More Technical Analysis Visit the Daily Technical Report

To discuss this report contact John Rivera, Currency Analyst: jrivera@fxcm.com

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