Today a series of Canadian economic data will be released at 13:30 GMT+1, including Retail Sales (MoM) for June, Core Retail Sales (MoM) for June, CPI (YoY and MoM) for July and Bank of Canada Core CPI (YoY and MoM) for July.
The YoY CPI and Bank of Canada YoY Core CPI rose by 1.5% and 2.1% in June respectively. The Bank of Canada MoM Core CPI in June showed no growth. The MoM Retail Sales in May rose by 0.2%, from 0.9% in April, the MoM Core Retail Sales in May, rose by 0.9%, from 1.3% in April.
The FOMC’s dovish minutes, released on Wednesday, resulting in the dollar has weakened across the board. Yet the dollar has rebounded since this morning. The weakness of the dollar boosted the oil price. In addition, the fall of US crude oil inventories reported on Wednesday also lifted oil prices. Most importantly, the recent rally is now being seen as an overreaction to OPEC’s freeze talk.
Fundamentally, the oversupply has still been the major issue, the Saudi Arabia’s daily oil production has reached an all-time high in July. In terms of the freeze talk in September, it seems to be unlikely for the two largest oil producers of OPEC, Saudi Arabia and Iran, will give up their market shares, by freezing the oil production. The conflict of interest will make it difficult for the OPEC to reach a unanimous agreement, as was the case in the previous freeze talk, in April.
Short term the market sentiment might still provide a support to oil prices until the end of the meeting, which will likely continue to weigh on USDCAD. Yet the bullish momentum will likely wane as the daily time frame KD indicators for WTI and Brent crude oil, both show it is overbought. In addition, WTI crude oil is near the major resistance zone between $ 49 to $ 50, be aware of a retracement.
USDCAD has turned bearish since 29th July, due to the underperformance of US Q2 GDP figures. The major uptrend support line was broken on 16th August, as the US retail sales figures were disappointing. The dovish FOMC statement released on Wednesday, further pulled the price down and broke the level at 1.2835, testing the next level at 1.277 then bounced as the dollar rebounded. It is currently testing the newly formed resistance at 1.2835. The daily time frame KD indicator is below 20, suggesting a rebound.
Keep an eye on the upcoming CPI and Retail Sales figures in June and July, to be released shortly. With positive figures, the support line at 1.2770 and 1.2700 will likely be tested. With lower-than-expected figures, the price will likely rebound and test the upside resistance level at 1.2835, followed by 1.2910.