The mood improves ahead of Powell
USD/CAD => The pair falls below 1.2950
EUR/AUD => The pair falls to 1.51
FTSE => The index rises to 7150
USD/CAD falls ahead of CAD retail sales data, Powell’s testimony
USD/CAD fell 0.3% in the previous session, falling away from 1.3079 the 2022 high reached on Friday.
The loonie tumbled last week tracing oil prices lower after Canada’s main export plunged almost 10%. Oil continued to trade around the monthly low, limiting gains in CAD on Monday. Meanwhile, the USD weakened yesterday in slow holiday trade. Today the pair is falling further as attention turns to Canadian retail sales which are expected to rise slightly after being flat in the previous reading.
Weaker than forecast sales could unnerve the market and raise fears that high inflation and rising interest rates are affecting consumer habits. Fed Chair Powell is also due to testify before the Senate in a bi-annual monetary policy report.
| CAD retail sales MoM May | Actual: 0.8% (0%) | Previous: 0.0% |
Where next for USDCAD price?
USD/CAD rebounded off 1.2525 the early June low, recapturing the 50 & 200 sma and the multi-month rising trendline.
The price rose to 1.3079 a fresh 2022 high before easing lower. The RSI supports more upside, although buyers will need to break above 1.3079 in order to extend the bullish run. Meanwhile, sellers may find comfort in the long upper wick at the high suggesting little acceptance for the price at the higher levels. Support can be seen at 1.2865 the May 13 low, with a break below here exposing the 50 sma at 1.28.
EUR/AUD falls after hawkish RBA minutes
After strong gains last week, EUR/AUD extended those gains on Monday after German wholesale inflation rose to a record high in May.
Although gains were capped by concerns of the political picture in France after President Macron lost his majority in Parliament. As a result, pushing forward his agenda could be much harder and mean political deadlock is more frequent.
Today the pair is falling after the minutes from the latest RBA meeting showed that the central bank will need to raise interest rates further to tame inflation and policymakers are open to a 25 or 50 basis point rate hike. They did also say that they expect prices to peak at 7% and start cooling by the year-end as pandemic-related supply chain disruption eases. The hawkish minutes, coupled with the risk on market mood is lifting the Aussie.
FTSE rises despite a deteriorating outlook
The FTSE closed 1.5% higher in the previous session, paring some of the 4% losses from the previous week and rising from the three-month low. The UK index is attempting to extend those gains today. However, the outlook for the economy is deteriorating. Inflation is over 9% and is expected to rise further to 11% this year, real wages have fallen by the most on record, and today travel chaos across the UK could hurt the UK economy further. Travel chaos as train drivers strike is estimated to cost the UK economy around £1 billion.
Support can be found at 7075 (March 15) and 7000 (round number).
Resistance for the pair can be seen at 7230 last (May 19 low) and 7330 (June 16 high)
