The CAD opens this morning Sydney time buying 0.7630 US cents. Recapping a turbulent week for the Loonie, the domestic unit fell across the board on Friday after weaker than expected retail sales and inflation data were absorbed by markets. These reads come at an important time, given then Central bank’s upcoming monetary policy decision is front of mind for CAD traders at present.
Lasering in on the specifics of the read, we saw headline consumer prices fall by 0.4% in the month of September, representing this is the biggest month to month decline in almost a year. On the yearly metric, prices only rose 2.2% in September, a sharp fall from the 2.8% we saw in August. Given markets were expecting increases of 0.1% and 2.7%, it was not surprising to see USD/CAD break through key technical support to touch monthly highs of 1.3120 before retreating slightly.
So far the controversy out of Saudi Arabia has not had any tangible affects on oil markets or financial markets more broadly. Given the Loonie’s correlations with commodity markets and oil in particular, CAD traders will be watching developments on this front very closely. The key risk event this week for the Canadian dollar is the Bank of Canada’s monetary policy decision on Tuesday. It will be interesting track the path of CAD positioning ahead of the release, especially after the weaker than expected domestic data last week. Outside of this, the CAD will continue to take its cues from oil prices and risk sentiment more broadly.
On the technical front, we now see key technical supports at the 1.3065 level however expect any downside breaks to test the key psychological handle of 1.3000. On the flipside, we expect USD/CAD to meet resistance on moves approaching 1.3160.