- USD/CAD came under renewed selling pressure on Thursday amid widespread USD weakness.
- Bulls seemed rather unimpressed by falling oil prices, which tend to undermine the Canadian dollar.
- Disappointing US jobless claims offset dismal Canadian retail sales and did little to provide support.
USD/CAD maintained its heavily offered tone near weekly lows around the 1.2655-60 area and could not get any respite for the dismal Canadian macroeconomic data.
The pair experienced aggressive selling on Thursday and retreated from its one-month highs reached on the first day of the current week, or 1.2900. As a result of broad-based weakness in the US dollar, the dollar experienced its third consecutive day of losses.
The Fed indicated Wednesday that it will likely begin tapering its monthly bond purchases towards the end of the year. Some investors, however, were disappointed by this statement, as they had expected the withdrawal of the large stimulus measures associated with the pandemic.
Furthermore, the key USD index erased the previous day’s hard gains to one-month highs sparked by a prevailing risk-off mood. In large part, this offset a modest intraday drop in oil prices, which tends to undermine demand for the commodity-linked Canadian dollar.
In spite of disappointing domestic retail sales figures, the Canadian dollar maintained its strong intraday gains against its U.S. counterpart. Statistics Canada reported July retail sales contracted by 0.6%, falling far short of predictions for growth of 4.4%.
According to consensus estimates, retail sales in Canada, excluding autos, fell 1% during the reported month. A larger part of the data was offset by an unexpected increase in US Weekly Initial Jobless Claims from 335,00 to 351,000 from the previous week.
In the meantime, we expect further losses in USD/CAD due to its inability to find buyers. Accordingly, the RSI (14) on the 1-hour chart already indicates intermittent oversold conditions, so it is prudent to wait for some consolidation or a modest bounce before positioning for further depreciation.