Canada’s retail sales to move the Looney

The greenback edged higher against its counterparts yesterday regaining some of the losses of the past week. On the political scene we note that Trump officially now got the nomination of the Republicans for the presidential elections. On the flip side, in the Democratic party, pressure is mounting for President Biden to abandon the campaign and for a new candidate, probably VP Kamala Harris, to take over. We may have to wait until August for the official nomination, yet as the pressure is rising, the issue may be expedited and we would be surprised to see developments unfolding in the coming days.

North of the US border we highlight the release of Canada’s retail sales growth rate for May, given also that BoC is to release its interest rate decision next Wednesday. Should the rate show a contraction as expected we may see the CAD slipping as it would imply that the average Canadian consumer is less willing and/or able to spend more in the Canadian economy. Furthermore, we note the slipping of oil prices yesterday and should bearish tendencies be maintained for oil we may see them having an adverse effect on the CAD as well.

USD/CAD edged higher yesterday, yet remains well within the boundaries set by the 1.3775 (R1) and the 1.3600 (S1) levels. We tend to maintain a bias for the sideways motion between the prementioned levels for now. Please note that the RSI indicator broke above the reading of 50 implying a slight build-up of bullish tendencies yet for the time being remains unconvincing. For a bullish outlook we would require the pair to breach the 1.3775 (R1) resistance line, setting in its sights the 1.389 (R2) level. Should the bears take over, we may see the pair breaking the 1.3600 (S1) support line paving the way for the 1.3460 (S2) support base.

Across the pond, the EUR weakened yesterday, given ECB’s interest rate decision. The bank as was widely expected remained on hold. The bank in its forward guidance and ECB President Lagarde’s press conference later on, left the possibility of a rate cut in the September meeting as wide open. Market expectations for the bank to start cutting rates in September were enhanced and tended to weigh on the EUR.

EUR/USD dropped yesterday breaking the 1.0890 (R1) support line now turned to resistance. The pair in its downward movement has broken also the upward trendline guiding since the 27 of June, signalling an interruption of the upward movement, hence we initially switch our bullish outlook in favour of a sideways motion. Furthermore, we note that the RSI indicator is edging lower implying that the bullish sentiment among market participants is easing, yet is still above the reading of 50, indicating a residue of bullishness still being present. Should the bulls regain control over the pairs’ direction we may see EUR/USD breaking the 1.0890 (R1) resistance line and aiming for the 1.1010 (R2) resistance hurdle. Should the bears take over ,we may see the pair dropping and aiming for the 1.0740 (S1) support base.

Across the channel, the GBP slipped today as the UK retail sales growth rates for June unexpectedly contracted on a headline and core level for June. The release was disappointing and highlighted the weakness of the demand side of the UK economy and could continue to weigh on the pound on a macroeconomic level.

JPY weakened against the USD yesterday. It should be noted that the headline CPI rate for June ticked up yet failed to meet the market’s expectations, while the core rate remained unchanged. We expect that should we see inflationary pressures rising over the summer we may see BoJ hiking rates again in September while for the July meeting we expect it to remain on hold. Also the possibility of another market intervention by BoJ to the Yen’s rescue should not be underestimated.

Other highlights for the day

Today on the monetary front, we note that NY Fed President Williams and Atlanta Fed President Bostic are scheduled to speak. On Monday’s Asian session, we get from New Zealand June’s trade balance and from China PBoC’s interest rate decision.