USD/CAD: Trading the Canadian Core Retail Sales

The Canadian  Core Retail Sales indicator  measures retail sales, excluding automobile sales, which tend to be very volatile and distort underlying trends. A reading which is higher than the market forecast is bullish for the Canadian dollar.

Here are all the details, and 5 possible outcomes for USD/CAD.

Published on  Tuesday at 13:30 GMT.

Indicator Background

The Core Retail Sales indicator  provides an important  snapshot of consumer spending and confidence in the economy. Consumer spending is critical to economic growth, so analysts keep  a close eye on this important indicator.  

The indicator has been on an impressive  upward trend since August, climbing from -0.1%, up to an  increase of 0.7% in December. However, the markets  are calling for a much smaller increase this month of only 0.2%. Will the  indicator continue its upward swing and surprise the markets?  

Sentiments and levels

 Strong US figures together with high  oil prices  are bullish for  the Canadian dollar.  However, recent weak domestic figures in Canada, such as wholesale sales,  along with  the possibility of a housing bubble, are weighing on the loonie. Thus, the overall sentiment is  neutral on USD/CAD towards this release.

Technical levels, from top to bottom: 1.0263, 1.02, 1.0143, 1.0070, 1.00, 0.99 and 0.9830.

5 Scenarios

1. Within expectations: -0.1% to 0.5%: In this scenario, USD/CAD could show some slight fluctuation, but it is likely to remain within range,  without breaking any levels.
2. Above expectations: 0.6% to 0.9%: A reading above expectations would be an indication  of growth in the Canadian economy,  and could  push the pair  below one  support level.
3. Well above expectations: Above 0.9%: An unexpectedly sharp rise in  retail sales  could propel USD/CAD downwards, and two levels of support  can be broken.
4. Below expectations: -0.5% to -0.2%: A reading into negative territory could push USD/CAD upwards, with one resistance level at risk.
5. Well below expectations: Below -0.5%: A very poor reading would hurt the loonie, and the  pair could break two  resistance levels or more.

For more on USD/CAD, see the  Canadian dollar forecast.