The Loonie finally showed its real face, falling for two consecutive days. This morning we had important economic data. In the first place, the consumer price index (CPI) came in at 1.5 percent on a year-over-year basis in February, versus a 1.4 percent increase in January. Also, excluding gasoline, the CPI rose 2.1 percent, matching the gain in January. In the second place, retail sales decreased for the third consecutive month, declining 0.3 percent to CAD$ 50.1 billion in January. Sales were down in 4 of 11 subsectors, representing 52 percent of retail trade. It is difficult to assume that CPI data is influencing the Loonie negatively because it should have pushed the Loonie in the opposite direction. However, we can assume that retail numbers are confirming the weakness in the Loonie.
The USD/CAD moved in a 44 pips range this morning (a high of 1.3427 and a low of 1.3383) after the release of CPI and retails numbers, but it is staying within this range; it is still trading at 1.3400 handle at the time of this writing. It is important to notice that the correlation of the Loonie with crude oil has disappeared this week, so market participants are more focused on fundamental factors when they trade the Loonie.
For today’s trading session, both technically speaking and given the “risk off” environment, the USD/CAD has a support of 1.3380, but it might test some resistance levels. It is critical to watch 1.3443, but first 1.3420. Of course any mood change in the FX markets might change the support and resistance levels drastically.